Lower phenol run rates in Europe have not affected the upstream benzene market in Europe, as cumene imports from the US are less feasible now than earlier in the year, sources said this week.
"The economics to import cumene from the US are not good at the moment," a European phenol producer said. As a result of reduced cumene imports, European plants were heard to be running at higher rates, supporting benzene consumption.
Cumene is produced from benzene and propylene and is a precursor to phenol production.
Phenol is used to produce resins, polycarbonates, various plastics and fibers, and is also used as a solvent.
Demand for phenol normally picks up after the height of the summer season, so lower run rates in Europe are because of technical issues rather than low demand, sources said.
"Phenol demand is quite strong at the moment," said the producer. "Demand in general is good but European capacity is not running 100%."
A phenol trader seconded that view, saying phenol demand was getting stronger.
Cumene imports into Europe in the first half of the year amounted to 79,028 mt, more than doubling year on year. For the whole of 2015, Europe imported 57,026 mt, according to Eurostat data.
Imports from the US accounted for 92.4% of the total in the first half of 2016.
In September 2015, Ineos announced the acquisition of a Axiall's aromatics business in Pasadena, Texas. Among the assets at the Pasadena facility is a 900,000 mt/year cumene plant, the largest in the world.
Benzene prices in the US were lower than in Europe for most of the first half of 2016, S&P Global Platts data showed. On average, US benzene prices were assessed at a $40/mt discount to European prices over the period. As a result, the US had a production cost advantage over Europe.
But since August 15, European benzene has been assessed lower than US product. Thursday, the European spot price of benzene was assessed at $687/mt CIF ARA, $48.54/mt lower than FOB USG benzene.
"When benzene was cheaper in the US compared to Europe, it made sense to import the cumene to Europe," a benzene trader said. "The European producers were reselling their benzene and propylene and bringing the cumene over from the US," he said, adding that at current prices, it made sense to use European benzene and propylene to produce the cumene in Europe.
"I would believe that phenol demand is increasing, and therefore supporting European benzene at the moment," the trader said.
