Phenol Prices Hit Rock Bottom in Q4-End as Demand Wanes, Industry Faces Headwinds

Hamburg, Germany: In the European market, phenol prices have remained low, reflecting the ongoing challenges faced by downstream Bisphenol A industries. Throughout the fourth quarter of 2023, these industries have struggled with weak demand, significantly impacting phenol market sentiments. Furthermore, persistent inflationary pressures have further dampened purchasing sentiments across end-use industries. As a result, phenol pricing dynamics have leaned towards the lower end, reflecting the broader economic challenges influencing the market. The industry has experienced a slower growth rate than expected, attributed to the off-season lull in the domestic market, leading to pessimistic sentiments among phenol manufacturers.

As per the observed market scenario, throughout the year-end holiday season in Europe, the region's markets have seen a slowdown in trade activities. This comes as the construction sector, already showing weak demand, continues to struggle, affecting market sentiments for phenol. Thus, to maintain balance, manufacturers have chosen not to adjust prices in recent weeks. The ChemAnalyst database has shown that the prices of phenol have hovered around USD 1190-1160 per ton on an FD basis. Meanwhile, the relatively mild winter has led to lower gas demand across Europe, causing prices for TTF Natural Gas to plummet. This reduction in input costs has helped lower phenol production costs. Market players are cautious as Europe is expected to face a tough production situation due to lower prices, with some sources indicating that profit margins could turn negative as the new year begins.

However, Yemeni armed forces' attacks on ships in the Red Sea have led to fluctuating oil prices. These attacks by the Houthi forces disrupted global shipping via the Suez Canal to Europe, which handles over 10% of global maritime trade. As a result, oil prices have remained strong. Additionally, the ongoing Israel-Hamas conflict, expanding to other parts of the region, is expected to have a long-term impact on oil prices, which might be reflected in the price trends of its downstream derivatives, including phenol.

According to the pricing intelligence of ChemAnalyst, the prices of phenol might demonstrate mixed fundamentals in the early weeks of the first quarter of 2024. If oil prices continue to inch higher, the price gains are likely to be translated into an increase in the manufacturing costs of downstream petrochemicals, such as phenol. However, despite the drop in inflationary pressure, demand from the downstream construction sector is expected to take time to rebound across the European market.