European Phenol prices remained stagnant at lower levels in the latter half of January 2025, reflecting subdued buying interest and a healthy supply. Market participants reported moderate to weak demand, with readily available product. One of the leading manufacturers voiced concerns about the long-term sustainability of current pricing, particularly Phenol, stating that if these conditions persist, the future looked bleak for the industry. Despite the return of market players from holiday periods, demand remained largely unchanged from 2024 levels, further emphasizing the challenges faced by producers. Profitability continued to be a major concern for many companies within this sector. The stagnant Phenol prices signalled a weakening market, further indicating a challenging economic landscape for European producers.

The current market situation is characterized by a global oversupply of Phenol and related products. This oversupply is primarily attributed to the significant increase in production capacity in Asia, especially China, since 2022. This surge in production has outpaced demand, leading to a market slump. The situation is further complicated by weak domestic demand in major markets. The global market imbalance is a significant contributor to the low prices and low profitability observed in the European Phenol market.

Adding to the challenges facing the European Phenol market, major producers were making significant adjustments to their production capacities. Mitsui Chemicals announced plans to close its 190,000 tonnes/year Phenol plant in Ichihara, Japan, by March 2027, citing declining profitability. The company aimed to consolidate its Phenol production around its larger, more efficient Osaka plant. Meanwhile, Mitsubishi Chemical, another major player, closed its 120,000 tonne/year downstream Bisphenol A plant in Kurosaki, Fukuoka, in March 2024, as a strategic move to improve competitiveness. While these shutdowns might potentially reduce overall supply in the long run, their impact on the current oversupply situation is likely to be limited in the near term. The companies were additionally exploring a joint venture to better manage supply during maintenance and operational issues.

The macroeconomic situation in Europe further exacerbated the challenges faced by the Phenol market. Germany, Europe's largest economy, experienced a second consecutive year of contraction in 2024, shrinking by 0.2%. This economic downturn significantly impacted manufacturing and construction sectors, two key downstream consumers of Phenol. The manufacturing sector witnessed a notable decline (-3.0%), particularly in key industries like machinery, equipment, and automotive. The construction sector experienced an even sharper contraction (-3.8%), primarily due to high construction prices and interest rates, leading to reduced residential building activity. The weak performance of these key sectors further depressed demand for Phenol and its derivatives, like Phenolic resins crucial to both these sectors. Phenol’s applications are vast, impacting automotive parts (brake linings, clutch plates), construction materials (plywood, laminates, insulation), and electronics. The reduced construction and automotive activity directly affected the demand for Phenolic resins, and hence, Phenol itself.

As per ChemAnalyst Pricing Intelligence, the European Phenol market has been facing a period of uncertainty. The ongoing global oversupply, coupled with weak demand from key downstream sectors like construction and automotive and a weakening European economy point towards stagnancy in the Phenol market. The planned production capacity adjustments by major players, while aimed at improving efficiency, may not immediately alleviate the market imbalance.