According to China Chemical Industry News, the domestic phenol industry has seen a continuous restructuring of supply and demand dynamics this year. Market conditions have undergone volatile recovery, industrial structures have upgraded rapidly, and the green transition has deepened. Overall, the industry is exhibiting a high-quality development trend characterized by orderly supply expansion and a structural recovery in demand. Against this backdrop, the phenol industry is poised to move beyond its cycle of sheer scale expansion by 2026, entering a new phase focused on quality and efficiency—marked by the steady release of capacity, divergent demand structures, and continuous technological upgrades.
"As a vital basic organic chemical raw material in the petrochemical value chain, phenol bridges upstream feedstocks—such as benzene and propylene—with downstream core products like bisphenol A, epoxy resins, and new fine chemical materials. It serves as a crucial intermediate linking bulk chemicals with fine chemicals, and traditional industries with emerging materials sectors. After years of development, the era of rapid capacity expansion has passed; the industry is shifting its focus from simple capacity growth to enhancing quality and efficiency," stated an official from the Henan Petrochemical Industry Association.
Steady Release of Production Capacity
On the supply side, domestic phenol capacity is being released steadily, with plant operating rates remaining high and stable. The industry is increasingly characterized by capacity intensification and integration. Data from Longzhong Information indicates that domestic monthly phenol production has remained high; the comprehensive operating rate ranged from 84% to 88% between January and April. Although it dipped slightly to 78%–80% in May and June, the average capacity utilization rate remains significantly higher than in previous years and well above that of most other products in the benzene value chain. In recent years, the industry has accelerated the phase-out of outdated, inefficient capacity, while new capacity additions have primarily consisted of large-scale, integrated petrochemical units. The use of large-scale single units and streamlined production processes has drastically reduced production costs and energy consumption. Consequently, industry concentration has risen, and the landscape of homogenized competition among small and medium-sized enterprises is gradually improving.
At the same time, the industry effectively balances supply and demand through routine plant maintenance. The official from the Henan Petrochemical Industry Association noted that the steady decline in operating rates since the second quarter reflects the entry of multiple major phenol plants into scheduled maintenance cycles. This periodic tightening of supply has effectively offset the pressure caused by the release of new production capacity. Compared to the significant price volatility of upstream raw materials like pure benzene, the phenol market has demonstrated markedly enhanced resilience against risks and downward price pressure.
Regarding foreign trade, persistent weakness in overseas market demand has pressured the profitability of international phenol producers and constrained plant operating rates. Consequently, the volume of phenol imports into China has steadily declined, while the domestic self-sufficiency rate has risen; this has solidified the trend of import substitution and strengthened the dominance of the local market, even as domestic exports have steadily increased. Statistics show that cumulative phenol exports from January to May 2026 reached 55,300 tons, a year-on-year increase of 225.29%.
Divergence in Demand Structure
Since the beginning of the year, the demand side has exhibited a structural divergence characterized by a "solid foundation of essential demand" alongside "growth in high-end sectors," providing robust support for industry development. Bisphenol A remains the primary downstream consumer of phenol, accounting for a stable share of over 50% of consumption. Its associated epoxy resin supply chain extends into essential sectors such as coatings, composite materials, and home building materials; this steady market demand serves as the bedrock of phenol consumption. While the slow recovery of the domestic real estate supply chain has tempered the growth rate of traditional downstream demand, the solid base of essential consumption has prevented drastic market fluctuations and ensured operational stability.
Meanwhile, emerging high-end sectors have become the core engine of growth for the phenol industry. As China’s manufacturing sector accelerates its transformation and upgrading, production capacity for high-value-added products—such as high-end nylon, electronic-grade epoxy resins, aerospace composites, and pharmaceutical intermediates—continues to expand, driving steady growth in demand for high-end refined phenol. my country has firmly established itself as the world's largest producer and consumer of phenol, accounting for over 35% of global consumption. Driven by a comprehensive chemical supply chain and robust industrial demand, the Asia-Pacific region continues to shape the global phenol industry, offering vast market potential for the continued development of the domestic sector.
Shao Huiwen, a senior market commentator, notes that market trends in the first half of the year indicate phenol prices remain heavily dependent on fluctuations in upstream pure benzene costs while also being driven by internal supply-demand fundamentals, resulting in a pattern of distinct range-bound volatility. Compared to the previous era of erratic, disorderly fluctuations, the market dynamics this year have become clearer; the industry has made significant strides in curbing speculation, and market-based pricing mechanisms have matured. Furthermore, the fact that the decline in phenol prices was significantly more muted than the drop in pure benzene prices indicates a more rational downstream demand structure.
Technological Upgrades and Iteration
Driven by the dual engines of policy support and technological innovation, the industry is accelerating its transformation toward greener and higher-end operations. Against the backdrop of "dual carbon" goals and normalized environmental regulations, market entry standards for the phenol industry have tightened. Small-scale, non-integrated production capacities—characterized by low efficiency, high energy consumption, and high pollution—are being rapidly phased out, marking a decisive shift in the industry's development philosophy from "scale is king" to "quality is king." The mainstream cumene production process continues to be optimized; manufacturers are upgrading catalytic systems, refining production workflows, and retrofitting equipment for energy efficiency. These measures have consistently reduced energy consumption and the discharge of "three wastes" (wastewater, waste gas, and solid waste), significantly enhancing the level of clean production.
Simultaneously, the industry has achieved continuous breakthroughs in R&D. Frontier technologies—such as bio-based phenol and novel, high-efficiency synthesis processes—are undergoing rapid iteration, providing the core technical foundation for the industry's low-carbon transition and the move toward high-end products. Regulatory oversight has effectively curbed disorderly competition, compelling enterprises to abandon destructive, low-price "involution" strategies in favor of product quality improvement, technological innovation, and green production. Consequently, the industry's overall competitiveness is steadily rising.
Industry insiders believe that this year marks a pivotal transitional period for the domestic phenol industry's transformation and upgrading. Driven by the restructuring of supply and demand, policy constraints, and technological innovation, the industry is gradually moving away from extensive growth models. It is steadily entering a new phase of development characterized by balanced supply and demand, stable profitability, and high-quality, green operations—underscoring the industry's resilience and long-term value.
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