[Overview]: In late August, the phenol market was dominated by up-and-down fluctuations. The relatively high average price ahead of settlement lent support, but end-user plants mostly purchased only on a need-to basis. Periodic gains in pure benzene provided some help; still, any upward momentum was short-lived. With demand lukewarm, downtrends tended to last longer. Around the end of August and the beginning of September, both feedstocks moved sharply higher, clearing away the gloom that had hung over the phenol market and reviving sellers' willingness to push prices up. Buying interest offered only moderate follow-through on the higher offers. However, given the price inversion between phenol and pure benzene and the deepening losses of phenol/acetone producers, the short-term phenol trend is expected to be cautiously positive.
I. Phenol and pure benzene at times moved in opposite directions, with phenol/acetone margins turning from losses to profits
Since August 17, phenol and pure benzene prices in East China have been relatively close, fluctuating back and forth around the inversion point. In late August and early September, pure benzene prices climbed broadly and rapidly, while phenol followed up only slowly; the two prices were largely inverted. By early September, pure benzene was trading 270 yuan/mt above phenol. Although acetone performed relatively strongly over the same period, the combined phenol/acetone price gain failed to keep pace with costs, deepening losses for phenol/acetone producers.
Recently, pure benzene has been fluctuating rapidly. These swings in feedstock costs have some effect on the phenol market, but the phenol market is also constrained by weak end-user buying interest, so its price swings have been narrower than those of pure benzene. With pure benzene rising more often than it falls, phenol has held little price advantage. Compared with that of the upstream product, phenol's upward movement has been slow—the main factor behind the widening losses of phenol/acetone producers.
II. Domestic supply is changeable, with limited spot pressure around the month-end/month-start transition
In late August/early September, Shenghong Refining & Chemical restarted its phenol/acetone unit, while Moyiwei Chemical (Shanghai) took its unit offline as scheduled for a short turnaround. Wanhua Chemical and Fuyu Chemical remained shut down. With minor adjustments to operating rates at some other phenol/acetone units, the sector's overall operating rate now stands at around 73%. During this handover period between unit shutdowns and restarts, capacity release from the restarted units is still limited, so the impact on domestic spot supply is modest. Given the maintenance schedules of the units still offline, the sector's overall operating rate is expected to rise gradually to about 80% in the near term. At that point, the domestic supply/demand balance should be assessed alongside changes in downstream operating rates.
Table Recent operating and maintenance status of domestic phenol/acetone units (10,000 mt/yr)
| Company | Phenol | Acetone | Maintenance status |
|---|---|---|---|
| Shenghong Refining & Chemical | 40 | 25 | Shut down for maintenance from June 28 to August 28 |
| Moyiwei Chemical (Shanghai) | 35 | 21 | Shut down on September 1; expected to last about 7 days |
| Wanhua Chemical | 47 | 31 | Shut down on August 10; expected to last about 45 days |
| Fuyu Chemical | 15 | 10 | Shut down for maintenance on August 17; expected to last about 40 days |
III. Short-term phenol trend in light of cost and supply/demand expectations
Feedstock costs are currently high, with pure benzene trading at an inversion of more than 200 yuan/mt above phenol. From the perspective of spread repair: if pure benzene continues to be pushed higher, it will keep pulling phenol up; if pure benzene's rally slows, phenol will likely hold firm or be probed higher; and if pure benzene retreats from high levels, the phenol market may not follow downward immediately, and any decline should be moderate, gradually rebalancing the spread between phenol and pure benzene.
On the supply side, no imported cargo arrivals have been tracked for the near term; arrivals will mainly consist of domestic coastal cargoes. Some cargoes may be loaded and shipped shortly. Attention should be paid to changes in phenol port inventories at Jiangyin—if inventories trend lower, supplier sentiment could gain some support, and these data need to be followed closely.
On the demand side, downstream end-user buying has consistently been cautious, and need-based purchasing provides only limited stimulus to the market.
On balance, cost price trends warrant close attention. As the phenol-pure benzene spread repairs, the correlation between the two will strengthen correspondingly. Suppliers are clearly inclined to hold prices firm. Although insufficient end-user follow-through buying presents a hurdle, the current strong upward momentum on the cost side underpins a positive short-term outlook for the phenol market, which carries no imminent downside risk for now.
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