Sluggish End-Use Industry Demand Strains the Phenol Prices in Germany

Hamburg, Germany: In Germany, Phenol prices have been adversely affected by a confluence of factors. Tight monetary policy amid the persistent inflationary pressure has hampered affordability and investment, dampening overall demand from the key manufacturing sector. The construction sector's limited activity has diminished the need for Phenol-based materials, curbing market demand. This lowered demand has created an oversupply situation, causing prices to trend downward. As a result, Phenol producers are grappling with the challenge of aligning their production levels with the subdued demand from the construction industry to stabilize prices.

The ChemAnalyst database has shown that the prices of Phenol have been settled within a range of 1130- 1100 USD per ton in the week ending August 25 on an FD basis. Phenol prices have consistently remained under pressure from the past quarter amid tepid demand from the downstream industries. On the upstream front, the prices of Benzene have been following stagnancy for the last two weeks amid no considerable improvement in demand from its end-use industries. On the other hand, the German Federal government has officially announced that the economy has experienced three consecutive quarters of recession, extending until the conclusion of June. Due to the bleak economic prospects, investors have reduced their expectations regarding the European Central Bank's likelihood of implementing a tenth consecutive interest rate hike during its upcoming meeting on September 14.

Furthermore, as per the market participants, the inquiries from the downstream Bisphenol A industries were moderate in the Netherlands. According to data from Statistics Netherlands, there was a significant drop of 35.9 percent in petroleum derivative prices in June, following a 30.6 percent decrease in May. Conversely, the considerable increase in U.S. crude exports in 2023 pushes down oil prices in Europe and Asia. This rise in exports is becoming a crucial supply source, especially as some producers are cutting their output, and sanctions on Russian crude are causing trade disruptions. As a result, energy resources are substantially available to support the production of downstream goods, including Phenol.

According to the pricing intelligence of ChemAnalyst, the limited demand from the downstream Bisphenol A industries is likely to dominate the Phenol market sentiments. Thus, the pricing dynamics of Phenol might remain under pressure in the German market. However, if international Crude Oil prices rise, the Phenol market will likely have to reckon with prices, and as a result, a hike might be reflected in the price realizations of Phenol in the forthcoming weeks.