SunSirs: Phenol and Acetone Industry Overview in 2025 (Key Events)

In 2025, the phenol and acetone industry entered a critical year of structural adjustment. Policy guidance clearly aimed to counter excessive competition, driving the industry's transformation from low-price competition to high-quality development; production capacity exhibited a "new and old replacement" characteristic, with the simultaneous release of new capacity and the exit of outdated capacity; market supply and demand imbalances intensified, leading to significant price declines and pressure on industry profitability; technological innovation focused on green, low-carbon, and efficient utilization, and the trend towards integrated industrial chains became increasingly prominent. The following is a summary of key events throughout the year:

I. Policy-driven transformation: Environmental protection and anti-overcompetition policies as dual driving forces.

-Early in the year: Domestic environmental protection standards were upgraded and implemented. Starting in 2025, the newly revised "Emission Standards for Volatile Organic Compounds in the Petrochemical Industry" will officially come into effect, clarifying the VOCs emission control requirements for phenol and acetone production enterprises. This will force small and medium-sized enterprises to accelerate the upgrading of their environmental protection equipment, further raising the industry's entry threshold. At the same time, the supporting implementation rules for the "Industrial Structure Adjustment Guidance Catalogue (2024 Edition)" were released, clarifying the standards for eliminating outdated production capacity in the phenol and acetone industry (mainly facilities that have been in operation for more than 20 years and have a scale of less than 300,000 tons/year), setting a clear boundary for industry structure optimization.

- March: The National People's Congress emphasizes combating overcapacity and excessive competition in the chemical industry. During the National People's Congress sessions, "breaking down local protectionism and market segmentation, and addressing excessive competition" became a hot topic in the chemical industry. It was made clear that the phenol and acetone industry needs to achieve efficient and intensive development through matching supply and demand and structural upgrading. A supply-side optimization model driven by both policy guidance and market mechanisms is gradually being established.

-Throughout the year: EU REACH regulations intensified compliance requirements. The EU updated its REACH regulations, adding four new restrictions on phenolic acetone substances. This placed stricter demands on supply chain traceability and carbon footprint certification for phenolic acetone derivatives. Domestic export-oriented phenolic acetone companies were accelerating the development of compliance systems to address these green trade barriers.

II. Restructuring of Production Capacity: New production capacity was being released in a concentrated manner, while outdated capacity was being phased out at an accelerated pace.

- First half of the year: Fuyu Chemical's phenol and acetone plant came into operation. As one of the first new capacity additions in 2025, Fuyu Chemical's phenol and acetone plant successfully commenced operations, bringing the total domestic phenol and acetone production capacity to over 10.48 million tons per year, further highlighting the ample supply situation.

- June: Yanshan Petrochemical and Jilin Petrochemical's outdated facilities officially cease operations.  The two phenol and acetone plants at Yanshan Petrochemical and Jilin Petrochemical, which had been in operation for over 20 years, had no plans for restart and will be removed from the total industry capacity. This amounts to a total capacity reduction of approximately 400,000 tons per year, bringing the proportion of outdated capacity down to below 7.54%.

- July: Zhenhai Refining & Chemical's 650,000 tons/year phenol-acetone plant goes into operation.  The large-scale phenol-acetone plant at Zhenhai Refining & Chemical successfully produced qualified products. After its commissioning, the domestic phenol-acetone production capacity exceeded 11.26 million tons per year, and the capacity share in the East China region increased to over 70%, further strengthening the regional production cluster effect.

-End of Q3: Jilin Petrochemical's new 350,000 tons/year plant comes online. Jilin Petrochemical's 350,000 tons/year phenol and acetone plant was completed and put into operation, achieving stable output in the fourth quarter, directly exacerbating supply pressure in Northeast and North China regions. The industry's operating rate rose to around 75%.

- Throughout the year: Multiple plants undergo long-term shutdowns for maintenance and adjustments. Several phenol and acetone plants, including those at CNOOC Shell, Huizhou Zhongxin Phase I, and Gaoqiao Petrochemical, entered long-term shutdown periods, totaling 890,000 tons per year of capacity. This offsets the 1.35 million tons of new capacity added throughout the year, resulting in a net increase of approximately 460,000 tons, meaning supply pressure remains unresolved.

III. Increased market volatility: Prices were falling sharply, and profit margins were continuously shrinking.

- July-August: Maintenance shutdowns at major companies led to a short-term supply squeeze. Several core phenol and acetone plants, including Wanhua Chemical (650,000 tons/year), Shanghai CISA (560,000 tons/year), and Sinopec Mitsui (400,000 tons/year), underwent concentrated maintenance shutdowns. Wanhua Chemical's maintenance period lasted as long as 45 days, temporarily reducing market supply and driving up phenol prices in the short term.

- October-December: Phenol prices hit a five-year low, falling by over 15%. The phenol market entered a period of significant adjustment in the fourth quarter. Affected by the combined negative factors of increased production capacity, weak downstream demand, and declining raw material prices, phenol prices in the East China market fell by a cumulative 15.44%. By the end of the year, mainstream quotations converged to 5,750-5,850 yuan/ton, the lowest level in nearly five years, and the average annual price decreased by 13.44% year-on-year.

IV. Technological and Industrial Upgrading: Innovation focuses on green and efficient solutions, and integrated models became the mainstream.

- Throughout the year: Patent applications continued to grow, with catalysis and energy-saving technologies becoming hot topics. From 2020 to 2025, the number of patent applications related to phenol and acetone in China increased by an average of 14% annually. By 2025, the focus will be on catalyst modification, wastewater treatment, low-energy consumption processes, and comprehensive utilization of by-products. The adoption rate of direct oxidation processes will increase, and the application proportion of emerging catalyst systems will rise to 30%.

- Within the year: Leading companies are accelerating the integration of their industrial chains. Several leading enterprises in the Yangtze River Delta region have integrated the entire "phenol-acetone-bisphenol A-polycarbonate" industrial chain through mergers and acquisitions. Some companies have also built supporting photovoltaic power plants, achieving a 15% reduction in energy costs and using differentiated competition to cope with market pressure.

- Throughout the year: The expansion of emerging application fields accelerated. The penetration rate of high-purity phenol and acetone products increased in areas such as new energy battery packaging materials, electronic-grade phenolic resins, and special epoxy resins. The procurement volume of phenolic intermediates in the medical disinfection field increased by 12% compared to 2023, becoming a new highlight of demand growth.

V. Adjustment of Trade Patterns: Increased export orientation and deepening of regional trade networks.

- Throughout the year: China's phenol and acetone exports have been steadily increasing. Domestic overcapacity is driving export-oriented development, and China's phenol and acetone exports are expected to exceed 850,000 tons in 2025, mainly destined for Southeast Asia and the Middle East, gradually shifting from a net importer to a regional exporter.

- Fourth Quarter: Imports exacerbate domestic supply pressure. Phenol shipments continued to arrive in the East China region, with a total of 49,700 tons arriving in December. Although port inventories remained temporarily stable, the expected arrival of further shipments is likely to continue to suppress market prices.

- Throughout the year: Regional trade trends became more pronounced, with the intra-Asian phenol and acetone trade network becoming increasingly interconnected.  Europe's reliance on imports rose to 35% due to the closure of older facilities, and the global supply chain shifted towards regionalization and nearshoring. Shipping costs and green trade barriers became key factors influencing trade flows.

In summary, in 2025, the phenol and acetone industry accelerated structural adjustments under policy guidance, with both capacity expansion and elimination occurring simultaneously. The imbalance between supply and demand led to a significant decline in prices, putting pressure on industry profitability. In the future, technological innovation, supply chain integration, and green transformation will be key directions for the industry to overcome internal competition and achieve high-quality development.

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