Phenol stabilizes after sharp rise and fall, geo-disturbance remains core variable

Market Overview

in the past week (March 9-15), China's phenol market has experienced a rare "roller coaster" market, with prices showing a three-stage trend of "soaring-falling-stabilizing.

At the beginning of the week, affected by the escalation of the conflict between the United States and Iraq and the obstruction of shipping in the Strait of Hormuz, international crude oil exceeded 100 US dollars per barrel, driving pure benzene and propylene to rise sharply, and the price of phenol soared. The highest price in East China was 11050 yuan/ton, while Sinopec's listing prices in North China and East China were raised by 3400 yuan to 12000 yuan/ton. March 10 became a turning point, crude oil surged and fell, and phenol prices plummeted by more than 2000 yuan/ton in two days. By the end of the week, the market gradually stabilized, fluctuating within a narrow range of 8500-9300 yuan/ton. As of March 16, the benchmark price of phenol in the business agency was 8700 yuan/ton, up 30.83 percent from the beginning of the month.

Cost and Supply

the sharp fluctuation of raw material side is the core driver of this round of market. The highest spot price of pure benzene in East China was negotiated to 10100 yuan/ton, and then quickly fell back to 7750 yuan/ton. Shandong propylene rose from 6410 yuan/ton to 8325 yuan/ton, up nearly 30% and then pulled back simultaneously.

The overall supply side is stable, and the domestic phenol operating rate remains high at 88%. Jiangyin Port has a stock of about 28500 tons, the stock of enterprises is not high, and the tight spot pattern has not fundamentally changed.

It is worth noting that Kuwait, Bahrain, the United Arab Emirates and Qatar have successively issued force majeure, affecting the export of 4.2 million tons/month naphtha. Naphtha and LPG tensions will be transmitted to pure benzene, propylene production reduction, if the situation in the Middle East continues for more than three weeks, the phenol ketone plant to reduce negative pressure will significantly increase.

Demand status

downstream demand is weak overall, and terminal acceptance of high prices is limited. Bisphenol A rose as much as 35.80 this week, from 8100 yuan/ton to 11000 yuan/ton, but the actual transaction follow-up is insufficient.

After March 10, the terminal factory quickly stepped on the brakes, the wait-and-see sentiment dominated the market, the trading volume shrank significantly, and the high price lacked substantial support.

Core Contradiction and Post-Market Judgment

the core contradiction of the current market is: rising costs driven by geopolitics with weak end demand deviation. The surge in raw material prices can quickly push up phenol quotes, but downstream plants do not buy it, making it difficult for prices to stand firm at high levels.

Lido: the cost side is still supported, port inventories are low, production capacity around Asia continues to clear (Singapore 480000 tons, Taiwan 485000 tons of phenol ketone have been stopped), supply contraction logic has been established in the long term.

On the negative side: Trump said the Iran war is "basically over", the geo-risk premium recedes, the Fed's interest rate cut is expected to cool, the dollar is strong to suppress commodity prices, terminal demand recovery is slow, costs are difficult to smooth downward transmission.

The price of phenol in East China is expected to be in next week. 8500-9300 yuan/ton interval oscillation, core operating range 8700-9000 yuan/ton.

Operational recommendations

short-term recommendations low buy mainly, in the range of 8500-8800 yuan/ton bargain small batch purchase, 9000 yuan/ton above careful operation. Two types of risks need to be focused on: first, the situation in the Middle East has repeatedly triggered renewed tensions in raw materials; second, if the war is over, it will take time for crude oil and naphtha to recover in Hong Kong, and there is limited room for raw material prices to fall back, so it is not appropriate to be blindly bearish. It is recommended to maintain low inventory operations and closely track the recovery of shipping in the Strait of Hormuz as a key signal to judge the inflection point.