Phenol  

*Millions of pounds per year. Nearly 98 percent of US phenol capacity is based on oxidation of cumene to form cumene hydroperoxide, which is then cleaved into phenol and acetone. Noveon Kalama uses a toluene oxidation process, with benzoic acid as an intermediate. Merisol recovers phenol from petroleum caustic wash streams, and Dakota Gasification obtains it as a byproduct of the company's coal gasification process.

The Mount Vernon Phenol Plant Partnership was established in 1987 by GE Holding, 49 percent, CITGO Petroleum, 49 percent, and JLM Industries, 2 percent. GE Plastics operates the plant in Mount Vernon, Ind. Merisol USA is 50 percent owned by Merichem and 50 percent by SASOL, South Africa.

In March 2000, Shell Chemical Company added 500 million pounds at its Deer Park, Tex., plant. In June 2000, Phenolchemie, part of Degussa-Hulls, opened its 880-million-pound plant in Theodore, Ala. Then in May 2001, INEOS PLC acquired Phenolchemie.

In February 2001, an investor group comprised of AEA Investors Inc., an affiliate of DLJ Merchant Banking Partners and DB Capital Partners Inc, acquired the Performance Materials division from BFGoodrich. In June that year, the former BFGoodrich performance chemicals segment, was named Noveon Inc. Kalama Chemical had previously been part of BFGoodrich’s Performance Materials business.

Sunoco acquired Aristech Chemical in January 2001, from Mitsubishi Corp. The deal did not include Aristech's acrylics business. Aristech had increased phenol capacity from 700 to 940 million pounds at Haverhill, Ohio, in the fourth quarter of 1999.

In March of this year, Georgia Gulf idled its 160-million pound per year phenol plant at Pasadena, Tex., citing weak domestic demand and excess industry capacity. The plant will be down for at least six months.

Frontier Oil recently closed the 110 million-pound per year phenol unit (and cumene) at El Dorado, Kans., as the first step in increasing gasoline output. Texaco Refining and Marketing originally owned the refinery. In 1997, the plant became part of Equilon, a joint venture between Shell Oil Products and Texaco Refining and Marketing. Frontier bought the refinery in 1999.

Profile last published 3/29/99; this revision, 5/27/02.

DEMAND
2000: 4.87 billion pounds; 2001: 4.50 billion pounds; 2005: 5.07 billion pounds, projected. Demand equals production plus imports (2000: 119 million pounds; 2001: 32 million pounds) less exports (2000: 583 million pounds; 2001: 624 million pounds).

GROWTH
Historical (1996 - 2001): 1.8 percent per year; future: 3.0 percent per year through 2005. The growth rate for the past five years appears small and is because of the nearly 8 percent fall in demand between 2000 and 2001. The average annual growth from 1995 to 2000 was 4.2 percent annually.

PRICE
Historical (1996 - 2001): High, ¢40.6 per pound, contract, Gulf, tanks, frt. equald.; low, ¢30.7, same basis. Current: ¢36.6, same basis.

USES
Bisphenol-A, 41 percent; phenolic resins, 28 percent; caprolactam, 13 percent; alkylphenols, 5 percent; xylenols, 4 percent; aniline, 3 percent; miscellaneous, 6 percent.

STRENGTH
The temporary closing of Georgia Gulf’s plant in Pasadena and the departure of Frontier Oil from the phenol market has eliminated 270 million pounds of capacity, or about 4 percent of capacity. This is helping to balance the oversupply situation and raised the industry-operating rate to nearly 75 percent.

WEAKNESS
The phenol market continues to be hurt by overcapacity, flat pricing and weak demand. The market is yet another casualty of the global economic downturn as demand for bisphenol-A, the leading use for phenol, is down from reduced demand for polycarbonate and epoxy resins. Before 2001, US polycarbonate had been enjoying growth of almost 5 percent per year. Restoration of phenol demand growth depends on economic recovery. By the beginning of this year, producers were forced to cut back production to about 70 percent of capacity.

OUTLOOK
With the improving economy this year, phenol’s derivatives will begin a new market pull that will translate into a return to growth for phenol. US phenol demand is projected to grow at 3 percent annually, through 2005.