Energy Cost Shock May Ripple Into 2022 Phenol Markets

Hopes that the global phenol prices were on a downtrend in Q4 were dashed in October as producers in the US and Europe announced plans to increase adders. European manufacturers had more success than their US counterparts, but it has also helped set the stage for 2022 business in the first half of next year. The rising cost of energy is pushing prices up and solid demand is providing good support. The dual control policy in China has started to impact phenol and acetone production and supply here has started to shorten – it is possible that trade flows over the next few months will change. However, much depends on how long the energy restrictions in China will last. Some market participants believe that it may not be lifted until March/April next year. A clean air policy in the months leading up to and after the Winter Olympics may see restrictions on both production and transportation of some chemical goods in Beijing and surrounding areas.

In the US, one producer had attempted in September to increase adders for Q4 business, but there was little support from the market amid strong resistance from buyers. According to market participants, Q4 adder increases were based on robust demand, snug supply, and a weaker acetone market. However, consumers were adamant that the timing was wrong as the final quarter is a traditionally soft season. Demand and supply, they say, is well balanced in today’s market. It appears that the producer then withdrew the increase from the market. But then, another manufacturer came to the market a few weeks later with an increase for October or as contracts allow. Other producers have said that contract discussions for Q1 2022 business are being opened with increases on the table. Consumers have resigned themselves that an increase not taken this quarter will be hard to avoid in Q1 next year. Demand has remained strong in all sectors except for the auto industry, but market participants are bullish; pent-up demand is building in this market. General sentiment for the first half of 2022 is buoyant – particularly in the epoxy resins sector.