Phenolic Resin Market Faces Challenges in Early Q1 2024 Amidst Tepid Demand and Surplus Supply

Texas, USA: In January 2024, the phenolic resin market in the USA exhibited a bearish outlook, with prices consistently decreasing on a week-on-week basis over the past few months. This downward trend is predominantly driven by subdued demand for phenolic resin from downstream industries. The current market situation suggests that the reduction in product procurement frequency is linked to an oversupply scenario in the consumer market, coupled with a low consumption rate of resins, including phenolic resin.

In the United States, the prices of phenolic resin experienced a week-on-week decline. As of January 26, 2024, the assessed prices of Novolac Phenolic Resin FOB Louisiana stood at USD 2200/MT, reflecting a decrease of 8.3%. Cumulatively for the month, prices recorded a significant drop of over 18.5%. This decline is attributed mainly to weak demand from downstream sectors such as adhesive, coatings, molding, and insulation, both in the domestic and overseas markets. Consumers displayed hesitancy towards making new purchases of phenolic resin, likely influenced by existing high inventories.

On the other hand, the US economy maintained a surprisingly robust performance in the fourth quarter, concluding an exceptionally strong year in 2023. Both individuals and businesses continued to engage in significant spending, displaying resilience despite the presence of elevated interest rates that have caused distress among businesses. The latest data indicates the resilient performance of the US economy, as the GDP registered a growth rate of 2% or higher for the sixth consecutive quarter. Consumer activity played a significant role in driving the majority of the growth observed in the last quarter. For the entire year of 2023, the economy expanded by 2.5%, a notable increase compared to the 1.9% growth recorded in 2022.

Industry insiders suggest that subdued demand and surplus supply of phenolic resin are expected to persist for the majority of the upcoming months of Q1 2024. Additionally, the European chemicals sector is still struggling with challenges as consumers exhibit hesitancy in placing new orders, and persistent long-term economic uncertainty continues to hamper market sentiments.

In response to the consistently weak demand for polymers and resins, including phenolic resins, companies have found themselves compelled to accept cost-cutting measures, leading some to make the difficult decision to slow down manufacturing operations.

As per the ChemAnalyst database, it is expected that the prices of phenolic resin will continue to decrease in the coming weeks due to anticipated weakness in consumer demand. However, ongoing geopolitical tension in the Middle East could impact the upstream Naphtha and Phenol market due to possible supply distress, and eventually, the phenolic resins market could be impacted due to fluctuating manufacturing costs.