SunSirs: The Domestic Phenol Market Generally Rose in February, and There Is Still Hope in March

In February 2026, the domestic phenol market broke free from its previous low-level fluctuations and began a steady upward trend. Increased cost support, structural adjustments on the supply side, and a recovery in downstream demand all contributed to the price increase. Market activity improved compared to January, and this "price increase and stable volume" laid a solid foundation for the industry's recovery throughout the year.

Phenol prices rose in stages in February, with a significant increase. Data from SunSirs shows that the benchmark price was 6,450 RMB/ton on February 1st, rising to 6,650 RMB/ton on the 27th, a 3.1% increase for the month. The average price in the core market of East China was approximately 6,500-6,550 RMB/ton, while the price increase in the north was slightly higher due to factories leading the price hikes, resulting in reasonable regional price differences.

From an annual perspective, the current price of phenol is at the median level of the past year. As of February 27, the minimum price of phenol in the past year was 5,670 RMB/ton, the maximum price was 7,947.50 RMB/ton, and the median price was 6,808.75 RMB/ton. The current price still has some room to rise from the median value, and there is still potential for further upward movement.

(i) Strong cost support laid the foundation for price increases

The core raw materials for phenol, benzene and propylene, traded strongly this month, providing strong support. Benzene prices saw a slight correction with supply and demand in balance, while the propylene market performed well, highlighting cost transmission. Although phenol and acetone plants remained unprofitable, the losses did not widen, and their willingness to maintain prices increased. This month, plant profits decreased by 90 RMB/ton to -926 RMB/ton compared to last month, prompting companies to raise prices and driving the market upward.

(II) Structural adjustments on the supply side, leading to marginal improvement in the supply-demand balance

Phenol supply in February was "generally ample, but locally tight," with the operating rate increasing by 3 percentage points to 89% compared to January. Yangzhou Shiyou's 320,000-ton/year plant was operating at full capacity, and Zhenhai Refining & Chemical's 650,000-ton/year plant increased its operating rate from 65% to 85%, increasing market supply. Meanwhile, Huizhou Zhongxin's Phase I 300,000-ton/year plant was shut down, and Ningbo Formosa Chemicals' 630,000-ton/year plant was operating at 60% capacity, easing supply pressure.

Regarding inventory, Jiangyin Port's inventory increased to 38,500 tons during the Spring Festival. However, holders faced little pressure to sell their contracts, and the leading price increases by northern factories boosted supplier sentiment, preventing price suppression. In 2026, the growth rate of new phenol production capacity is expected to slow, imports will decrease, and domestic substitution will be highly effective, with import dependence projected to fall below 3%, consolidating China's dominant position in the domestic market.

(III) Downstream demand ws gradually recovering, supporting the market rebound.

The Spring Festival holiday led to a drop in the operating rates of downstream bisphenol A and phenolic resin production to 70.84% and 20% respectively, resulting in weak demand support. After the holiday, enterprises gradually resumed operations, and after the Lantern Festival, end-user demand will recover and procurement increases, providing substantial support to the market. Bisphenol A accounts for over 40% of phenol consumption, and new plants in 2026 will drive demand growth; current positive expectations are boosting procurement. Phenolic resin will benefit from the real estate recovery and automotive lightweighting, with operating rates expected to increase; the new energy vehicle and photovoltaic sectors will drive demand for high-end phenol, injecting momentum into the market. 

Overall, in February, prices rose steadily, driven by costs and demand, with no speculative fluctuations. Secondly, there was a clear supply-demand dynamic, with high port inventories and suppliers maintaining prices, and delayed resumption of work downstream coupled with strong demand, resulting in moderate increases in transaction volume. Thirdly, there was regional coordination, with prices rising in the north, followed by East and South China, and reasonable price differences.

In the short term, the market is expected to continue its upward trend in March. On the supply side, Huizhou Zhongxin's Phase I plant is scheduled to restart while Phase II undergoes maintenance, and Shandong Ruilin's new plant will be put into operation in mid-March, releasing positive news for raw material procurement. On the demand side, downstream industries fully resume operations, and new bisphenol A plants are driving demand growth. On the cost side, benzene and propylene prices are relatively strong, supporting a moderate price increase.

In the long term, 2026 is a crucial year for industry recovery, characterized by "slower supply growth and steady demand recovery." Annual production capacity is projected at 6.5 million tons, with a capacity utilization rate of 83%, while consumption is estimated at approximately 5.8 million tons. Supply and demand are expected to reach equilibrium, with prices rising and profitability improving. However, risks such as raw material price fluctuations and weaker-than-expected demand recovery should be monitored.

In summary, the phenol market showed a clear upward trend in February 2026, which is an important signal of industry recovery. Subsequent supply and demand optimization will drive the market to gradually get out of the low level and steadily recover.

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