European Phenol Prices Edge High Amid Rising Raw Material Costs in Late May 2024

Hamburg (Germany): For the past two weeks, Phenol prices in the domestic market of Germany have shown an upward trend, largely influenced by the increasing prices of its upstream raw material, benzene. This rise is primarily driven by the strengthening of international crude oil prices. However, demand from the downstream construction industries has remained average, leading to moderate procurement of Phenol.

According to the ChemAnalyst Database, Phenol prices increased by USD 35 per ton in the week ending May 24th. Regarding energy inputs, there is an expectation of a decline in crude oil stocks for several months starting in June. This decrease is due to a seasonal increase in global demand, estimated at 3.6 million barrels per day from April to August. Additionally, extended production cuts by OPEC+ and ongoing conflicts in the Middle East and Ukraine could contribute to geopolitical price premiums, potentially leading to further increases in Phenol prices. On the other hand, production facilities have been operating at slightly reduced rates as there was already enough availability of finished stocks to meet the demand from the terminal markets. The Manufacturing Purchasing Manager Index has also contracted and settled in the contraction zone.

According to market sources, one of the downstream manufacturers of Phenol, PPG, is set to invest USD 300 million in advanced manufacturing across North America to meet the increasing demand for paints and coatings in the automotive industry. This investment, starting in 2024 and extending over four years, includes the construction of a new 250,000-square-foot manufacturing plant in Tennessee. This will be PPG's first new U.S. facility in 15 years. Initially, the plant will produce paint and coatings for automakers and auto parts suppliers, but it may eventually serve other industrial sectors such as transportation, heavy equipment, construction, and consumer goods. Once fully operational, the plant is expected to employ around 130 full-time employees and produce over 11 million gallons of paint and coatings annually. Construction is scheduled to begin in August 2024, with completion anticipated by 2026.

Furthermore, in China, the price of raw material pure benzene has rebounded since May, offering some support for Phenol. As of May 17th, Phenol supply and demand pressures remain moderate, with manufacturers continuing to work on reducing inventory levels. Post-holiday restocking in the downstream market has led to an improvement in Phenol demand compared to earlier periods, resulting in a stable supply and demand balance.

According to the pricing intelligence of ChemAnalyst, the prices of Phenol are anticipated to inch higher across the regional market. The volatility in the crude oil market is likely to pressure the pricing dynamics of its downstream derivatives, including Phenol, on broader levels. However, Asian market players are anticipating an improvement in demand from the downstream industries, which is expected to reinforce the market dynamics of Phenol in the forthcoming weeks.