Deterioration in End-User Demand Constrain the German Phenol Prices in Early Q3 of 2023

Throughout the second quarter of 2023, the prices of Phenol have remained lower in the European market. The inquiries from the downstream Phenolic resins were observed to be in dire straits, constraining the market fundamentals of Phenol among the manufacturers. Tight monetary policies and volatile energy prices have all been playing a crucial factor in the successive price realizations of Phenol. Amid a challenging macroeconomic environment, the production rates of manufacturing firms have been curtailed as the demand from the downstream Bisphenol A industries did not show any signs of improvement.

The ChemAnalyst database has shown that the price of Phenol has contracted by approximately USD 100 per ton on the week ending 14th July 2023, compared to the prices observed at the start of July in Germany. Despite a continuous effort by European Central Bank, the still-high inflationary pressures in the major economy of Europe, Germany, have directly impacted the performance of key manufacturing sectors. The downstream market players were unwilling to purchase the finished goods despite the price decline amid increasing inventory pressures. The demand from Bisphenol A Industries has also been having troubles for some time, and extensive restructuring is still ahead for input raw materials, including Phenol. Furthermore, the measure taken by European Central Bank to combat the still-high inflation has led to eight consecutive interest rate hikes in June by 25 basis points to 3.5 percent, its highest level since 2001.

On the other hand, INEOS Phenol, a subsidiary of the INEOS Group, announced in late June that it might reorganize production at its 6,80,000 mt/yr facility in Doel, Belgium, near Antwerp. The company cited challenging market conditions and the need to boost the Phenol Business's competitiveness in Antwerp. On the input energy front, the gas supplies in Germany continued to be robust as the procurement from the production sector has moderated. According to Gas Infrastructure Europe, gas inventories across the European Union and the UK amounted to 889TWh. The storage facilities have already reached 79% capacity, while the average fill for the past decade was only 60%. Moreover, European gas prices have come down from their recent highs in mid-June to Eur27.05/MWh last week.

According to the pricing intelligence of ChemAnalyst, the weak terminal demand from the downstream Bisphenol A industries is anticipated to cause a downward shift in the pricing dynamics of Phenol. In addition, the price competitiveness in the Asian market is also likely to exacerbate market concerns and affect the prices of Phenol in the European market.