Chemical Week • July 3/10 • Cumene long on weak fundamentals

Producers close older plants in Europe on bearish outlook for phenol, acetone

Limited end-user demand is weighing on sentiment across Europe’s phenol and acetone value chain, with little prospect of an upturn for primary feedstock cumene in the currently long regional market before the end of 2023, according to experts at S&P Global Commodity Insights.

Continued weak fundamentals and a bearish outlook, expected to persist deep into 2024, have prompted several major producers to reevaluate their European production footprints for cumene and phenol, and in some cases to close older assets.

Ineos Phenol, an Ineos Group subsidiary, announced in late June a potential reorganization of its production operations at the company’s Doel, Belgium, site, near Antwerp, citing “difficult market conditions” and a need to strengthen the competitiveness of the phenol business in the Antwerp area. The Doel facility is the world’s largest phenol production plant, with a nameplate capacity of 680,000 metric tons per year, according to Ineos. The site produces phenol, acetone and alpha-methylstyrene (AMS) using cumene.

This followed an announcement in March by Olin Corp. that it had ended cumene operations during the first quarter at its 735,000 metric tons per year plant at Terneuzen, Netherlands. The plant supplied approximately 90% of its cumene to Ineos Phenol at Antwerp. The Terneuzen facility was Olin’s sole cumene production plant.

Earlier this year, Ineos started operations at a new 750,000 metric tons per year cumene plant at Marl, Germany, and shut down an older 260,000 metric tons per year cumene plant at the same site. Ineos’s new plant began feeding cumene to the company’s phenol plants at Doel and at Gladbeck, Germany, replacing supplies that had previously come from Olin’s Terneuzen facility.

BP PLC is also understood to be planning the closure of a 500,000 metric tons per year cumene unit at the company’s refinery and petrochemicals complex at Gelsenkirchen, Germany, once Ineos has completed final integrity tests and starts to ramp up production at the new Marl plant.

BP’s unit has been supplying cumene to Ineos for phenol production in Germany. However, if BP does eventually shutter its cumene unit, the company is likely to continue supplying benzene and refinery-grade propylene from Gelsenkirchen as feedstock to Ineos’s cumene plant at Marl, according to S&P Global.

In another related restructuring move in Europe, Olin closed a bisphenol A (BPA) production line at Stade, Germany, in the fourth quarter of 2022. The phenol market is driven primarily by demand for BPA, which accounts for almost half of global phenol consumption, according to the Chemical Economics Handbook (CEH) by S&P Global Commodity Insights. Demand for phenol, acetone, AMS and BPA is driven primarily by the production of polycarbonate (PC) and other plastics, phenolic resins, synthetic fibers and solvents.

In December 2022, Trinseo PLC also announced capacity closures in Europe and North America, including a 300,000 metric tons per year styrene plant at Böhlen, Germany, and one of two 80,000 metric tons per year PC lines at Stade. This was due to their “uncompetitive position” in global markets caused mainly by capacity additions and elevated natural gas prices in Europe, the company said. Trinseo will continue to produce PC at its other Stade plant for use in its downstream compounding business.

Weak demand, oversupply dominate

Weak demand and oversupply dominated the European petrochemicals sector throughout the first half of 2023.

Ineos’s new cumene plant at Marl, originally scheduled to start operations in 2021, has been operating at very low rates since startup, sources have indicated to S&P Global. The firm’s phenol plant at Gladbeck is the company’s largest single-train phenol complex, with capacity for more than 650,000 metric tons per year of phenol and 400,000 metric tons per year of acetone.

Ineos said in its announcement about the potential reorganization at Doel that phenol production operations at that site had not restarted following completion of a maintenance turnaround in the fall of 2022.

“A combination of unprecedented energy prices, high inflation and a cyclical slowdown have considerably weakened industrial demand for chemical products. End-users of phenol and acetone have substantially reduced their production. Customers are also facing increased competition and imports from suppliers from Asia,” Ineos said. The company also postponed maintenance at the Gladbeck phenol plant until at least this fall, due to the ongoing Doel plant shutdown, traders told S&P Global.

Over the past 12 months, Europe’s position “has evolved from a net exporter of phenol and acetone derivatives to a net importer,” according to Ineos. Capacity utilization at Europe’s phenol and acetone plants has declined to an average of 50% so far in 2023, having averaged 80% in the period prior to the European gas crisis, it said. “In line with these developments, production at the Doel plant has not restarted following the turnaround works of last autumn,” Ineos said.

Cumene is converted at Doel into phenol, acetone and AMS for onward use in a range of applications. Ineos is “responding to the difficult market conditions in order to strengthen the competitive edge of the Antwerp site in global markets,” said Hugo Piot, Doel site manager/phenol at Ineos.

Ineos is the world’s largest producer of phenol and acetone, with just under 1.9 million metric tons per year (MMt/y) of phenol capacity and about 1.2 MMt/y of acetone production. It is also the world’s largest consumer of cumene, according to the company. In April, Ineos completed the acquisition of Mitsui Chemicals’ phenol business at Jurong Island, Singapore, for $330 million, adding more than 1 MMt/y of nameplate capacity for cumene, phenol, acetone, AMS and BPA to the company’s global phenol business, it said.

“Phenol demand in Europe is very poor at the moment,” said Yazmine Khan, associate director/aromatics at S&P Global Commodity Insights. One current bright spot, however, is cumene demand in Europe for gasoline blending. “Cumene into gasoline appears to still be a good outlet,” she said. Cepsa SA subsidiary Cepsa Química, SA — another of the world’s largest producers of cumene and phenol — is also understood to be running its cumene and phenol units in Spain at low rates and selling cumene into gasoline, she added.

In terms of nameplate cumene capacity in Europe, the impact of the startup of Ineos’s new plant at Marl combined with the shutdown of the other older plants with near equivalent capacity “is almost net zero,” said Katie Elliot, director/aromatics at S&P Global Commodity Insights. “As much goes down as comes up… so the expectation was for minimal change in capacity. The only thing that’s different is that there’s not the phenol demand, which has obviously been quite significantly hit in Europe,” she said.

The cumene market balance has lengthened “massively” compared with a year ago, Elliot noted. “The lack of phenol demand is making it longer… phenol demand has tanked. [So] now in that intermediary period before everything shuts down, you’ve got extra capacity and less demand.”

Discussions at the 165th European Petrochemical Luncheon, held recently in Rotterdam, focused on the weak fundamentals of limited demand and oversupply, S&P Global said. Market sentiment was “very pessimistic, with most participants writing off any chance of a recovery in the second half of the year. Uncertainty seemed to be the major theme as market players reflected on the market dynamics in the first half of the year,” S&P Global said.

Platts, an S&P Global business, assessed phenol free delivered (FD) in northwest Europe at €1,023 per metric ton on June 27, down 58% from a record high of €2,451 per metric ton on June 21, 2022.