The margins for Asian phenol producers have turned positive, with phenol last assessed at $1,450/mt CFR China Tuesday, after rebounding from an intra-year low of $1,250/mt on June 19, Platts data showed.
Over the same period, Asian benzene prices gained $133.50/mt to $1,134/mt FOB Korea. On Wednesday, Asian benzene was assessed flat day-on-day at $1,134/mt FOB Korea, amid a thinly traded market.
The margins improved as the rising prices -- caused by producers limiting supplies by lowering operating rates and shutting units -- outpaced the climb in feedstock benzene prices.
In China, state-owned Sinopec raised its ex-works phenol offers in East China by Yuan 500 ($64)/mt since June 19 to Yuan 11,000/mt Wednesday.
"Inventory levels in China were falling...that's why China domestic traded prices and CFR China prices got higher," a Chinese trader said Wednesday.
"Producers were [also] reluctant to offer at low prices after seeing feedstock costs rising," he added.
Phenol producers started to face losses on May 22, when benzene was assessed at $1,091/mt FOB Korea, putting the breakeven for phenol production at $1,391/mt. They typically require phenol to be at a $300/mt premium to feedstock benzene prices to break even. Phenol was then assessed at $1,340/mt CFR China, implying that producers were making a loss of $51/mt.
Meanwhile, Japan's Mitsui Chemicals, which shut its Chiba solvents plant for around two weeks earlier this month due to poor demand, is now running the plant at 90% of capacity, a company source said Wednesday.
"We plan to maintain the operating rate at 90% for now," the source said.
"But if production margins start to fall [again] we might lower the operating rate," the source added.
Separately, market sources expect weak downstream bisphenol-A demand to limit the recent uptrend in phenol prices.
"Phenol prices have recently increased because of higher feedstock prices and lower operating rates, but BPA demand is still not recovering fast enough," a Taiwanese producer said Monday.
Market sources said BPA prices were heard unchanged week-on-week Wednesday at around $1,600/mt CFR.
"This could potentially cap the price increase of phenol, despite cost pressure from higher feedstock prices," a Chinese trader said Wednesday.
BPA producers typically require prices to be $300/mt higher than phenol to break even, and are currently facing losses.
"It is a buyer's market still," a Japanese producer said. "End-users are not able to accept current market prices."
