Lead-in: Since entering September, the domestic phenol market has experienced frequent fluctuations. The overall trend is characterized by slow upward momentum, a short cycle duration, and susceptibility to declines, though cost support keeps the downward pressure manageable. At the beginning of the month, both key raw materials (pure benzene and propylene) saw significant price increases. While high input costs helped push phenol prices up, weak end-user demand limited this upward movement. This resulted in an inversion between phenol and pure benzene prices, with acetone prices briefly surpassing those of phenol. Currently, end-use factories are slowing their procurement activities, showing low interest in essential purchases. The impact of rising costs struggles to pass through to downstream markets, leading to a temporarily weak trend that encourages market participants to adopt a wait-and-see approach, thereby weakening prices further. Conversely, falling prices dampen buying enthusiasm from end-users, resulting in an overall slightly bearish market sentiment.
I. Weak End-User Demand Makes It Difficult to Resolve the Phenol-Pure Benzene Price Inversion
Since August 21, there has been a continuous price inversion between phenol and pure benzene in East China. For nearly half a month, this situation has shown no signs of easing. Due to low acceptance of high prices among end-use enterprises, the ability to pass on costs beyond the 9,000 RMB/ton level has weakened. Consequently, the price gap between phenol and pure benzene has fluctuated within a range of -25 to -765 RMB/ton.
Geopolitical conflicts have driven up crude oil prices, disrupting expectations for a steady recovery in domestic supply. Pure benzene prices surged under the pressure of restocking amid low inventories, breaking through the highs seen in the second quarter. While the sharp rise in pure benzene provided some pull-through effect for the phenol market, this influence was short-lived and occurred in waves. End-users remained cautious about chasing higher prices, creating resistance to passing high phenol costs downstream. Suppliers faced difficulties in selling inventory, causing phenol prices to weaken ahead of pure benzene. As a result, the price gap between the two is unlikely to return to positive territory in the short term.
II. By-product Acetone Leads Initially Before Pulling Back, Briefly Surpassing Main Product Phenol
Phenol and acetone are co-produced in integrated units. Under normal circumstances, the price of phenol typically exceeds that of acetone by 1,000–2,000 RMB/ton. However, during specific periods, acetone prices have occasionally surpassed phenol, though such instances usually do not last long. Notably, this occurred for approximately two months in 2025. In September 2026, acetone prices briefly exceeded phenol, which helped partially restore profit margins for phenol-acetone producers. Nevertheless, the prices of main and by-products are expected to gradually revert to their typical relative positions. Given the divergent supply-demand dynamics for current raw materials and products, time may be needed to achieve balance.
In early September, acetone prices rose sharply twice in quick succession. Within just four working days, prices jumped from the 7,000s to the 8,000s, and then rapidly into the 9,000s. From September 11 to 14, acetone prices were slightly higher than phenol, with the by-product temporarily replacing the main product in terms of pricing strength, helping to repair industry profit margins. This abnormal phenomenon occurred primarily because phenol’s downstream sector is concentrated, making it difficult to pass high prices down the chain, leading to phenol prices declining before pure benzene and acetone. In contrast, acetone’s downstream sector is more dispersed, allowing it to better withstand risks associated with high prices. However, as acetone prices lingered above 9,000 RMB/ton, end-user purchasing became increasingly sluggish. On September 15, the downtrend accelerated, with mainstream market prices falling 200 RMB/ton below phenol.
III. Focus on Costs, Profits, Supply-Demand Dynamics, and Related Products to Forecast Short-Term Phenol Trends
Currently, costs remain elevated. As of September 15, phenol prices in East China were inverted against pure benzene by 735 RMB/ton. Although this situation is unreasonable, poor pass-through of high costs to the demand side means that closing the price gap will take time. If pure benzene continues to strengthen and the price divergence between phenol and pure benzene widens, it may somewhat alleviate the downward pressure on phenol. If suppliers seize opportunities to raise prices, the extent of any increase will depend on buyer sentiment.
The acetone market is currently pulling back from high levels, while phenol also faces downside potential due to weak end-user demand. There is a possibility that losses for phenol-acetone producers may widen. However, as losses increase, they may eventually limit further declines. Once phenol prices fall below 9,000 RMB/ton, monthly average price levels could provide bottom support. Market participants are advised to operate with caution.
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