MarketWorks

Product Capsule
Cumene/Phenol/Acetone

Date: 11/08/2008
KEVIN L. BOYLE CONSULTING

CONTACT:

Kevin L. Boyle, Consulting

(832) 283-3227
klbconsulting@consolidated.net
www.klbconsultingservices.com
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PRODUCT CAPSULE: CUMENE/PHENOL/ACETONE

The Players 
MM lbs Location Cumene Phenol Acetone
Sunoco Chemicals Philadelphia 1,350 1,103 688
Weatville, NJ 500
Haverhill OH 942 584
Shell Chemicals Deer Park TX 1,600 1,323 807
Ineos Phenol Mobile AL 1,191 739
Port Arthur 990
Mount Vernon Mount Vernon IN 750 465
Phenol
Dow Chemical Oyster Creek TX 650 397
Institute WV 170
Georgia Gulf Plaquemine LA 501 298
Pasadena TX 1,500 161 104
JLM Industries Blue Island IL 150 99 62
Citgo Corpus Christi, TX 1,100
Flint Hills Corpus Christi, TX 1,500
Marathon Catlettsburg, KY 825
Total 9,515 6,719 4,313

Cumene is produced from refinery grade propylene and benzene. These are principally refinery products.
Consequently, cumene production is a good way for refineries to upgrade products. Most of the cumene capacity in the
US is associated with refining operations, not petrochemicals.

Phenol and acetone are coproducts. Since both are transported easily, the industry is structured so that much of
the phenol capacity is co-located with the cumene. Phenol and acetone represent further upgrades of refinery products,
still producing fungible commodities.

Capacity in the entire value chain has been long for many years. No significant capacity expansions are
expected in the US over the next few years. Neither are any closures anticipated.
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PRODUCT CAPSULE: CUMENE/PHENOL/ACETONE

 
Value Chain 
  Benzene  Phenol
0.65:1  1
Cumene

Propylene  1.33:1  Acetone

0.35:1  .62 

Benzene and refinery grade propylene are products of both refining and ethylene production, when heavy
feedstock are cracked. Cumene production can use refinery grade propylene (about 70% propylene). Steam crackers
generally produce higher quality chemical grade propylene.

Benzene and propylene are combined in a ratio of 65:35 to produce 1 unit of cumene. Modern processes
practiced by most producers, use 1.33 units of cumene for 1 unit of phenol. Acetone is a coproduct of phenol produced in
a ratio of about 1:0.62.

Cost (other than feedstocks) and Capex 
Cumene/Phenol/Acetone  ¢/lb 
Variable Costs (Fuel, electricity, steam, cooling water)  1.0 
Operating costs (Labor, maintenance, plant O/H)  2.6 

$MM 
Capex (440 MM lbs Phenol, 540 MM lbs. cumene; brownfield plant)  240 
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PRODUCT CAPSULE: CUMENE/PHENOL/ACETONE

 
 
End Uses 

Cumene is used almost exclusively to produce phenol and

acetone.

Phenol’s largest use (45%) is for bisphenol-A (BPA). In

turn, BPA is used to produce polycarbonates -- which end up
as CD’s and DVD’s; and epoxies – adhesives heavily used in
construction.
The next biggest use of phenol is for phenolic resin (30%).
Most phenolic resin is used as the binder in plywood,
waferboard, and OSB. Demand for these depend mainly on
house construction.
Caprolactam (15%) is a feedstock for the production of
Nylon-6 fiber.

The largest application for acetone is methyl

methacrylate (MMA). MMA is used to produce
polymethylmethacrylate (Lucite), and acrylic coatings.
Acetone is also a co-feedstock in the production of
bisphenol-A.
Most of the rest of acetone is used as a solvent,
especially for organic chemicals.

Generally, the applications for this value chain are

considered mature. Growth is highly dependent on the
housing industry and GDP. These products are fungible
commodities with no differentiation.
Phenol is the most important product in the value
chain. Acetone is less desirable, and technological efforts
have been to reduce the yields of acetone in production. The
economic drivers for the value chain depend mostly on the
housing industry. Plywood is the biggest influence. Other
end uses related to housing include some epoxy resins and
acrylic applications that include architectural coatings.
Audio and video media are generally regarded as mature
markets. With the technological trends toward digital and
computer storage of media, growth beyond GDP rates for
polycarbonates is unlikely.
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PRODUCT CAPSULE: CUMENE/PHENOL/ACETONE

 
 
Supply/Demand 
US Cumene MM lbs AAGR
2007 2008 2009 2010 '07-'10
Capacity 9,515 9,515 9,515 9,615 0.3%

Production 7,990 8,070 7,747 7,980 0.0%

Operating Rate, % 84% 85% 81% 83%

Demand 7,740 7,430 7,510 7,880 0.6%

Net Trade 250 640 237 100 -26%

US Phenol MM lbs AAGR

2007 2008 2009 2010 '07-'10
Capacity 6,719 6,719 6,719 6,719 0.0%

Production 5,910 5,674 5,730 6,017 0.6%

Operating Rate, % 88% 84% 85% 90%

Demand 5610 5330 5345 5666 0.3%

Net Trade 300 344 385 351 5%

US Acetone MM lbs AAGR

2007 2008 2009 2010 '07-'10
Capacity 4,313 4,313 4,313 4,313 0.0%

Production 3,723 3,574 3,610 3,791 0.6%

Operating Rate, % 86% 83% 84% 88%

Demand 3540 3400 3500 3780 2.2%

Net Trade 183 174 110 11 -61%

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PRODUCT CAPSULE: CUMENE/PHENOL/ACETONE

Supply/Demand Commentary 
Production through the value chain has held up better than might be expected in 2008. Producers have reported
that exports have been relatively strong. However, things should weaken in 2009.
New capacity is coming on stream in Asia which may weaken the demand for exports, or at least the growth in
exports. The global economy, especially Asia, is expected to suffer downturns along with those of the US. There will be
ample feedstocks from refineries as they are expected to operate at high rates through the first half of 2009. Gasoline
inventories are low, hurt by the hurricanes. Even with continued falling demand for gasoline and increases in ethanol as a
blending component, refineries will need to rebuild inventories before the summer driving season.
Domestic demand for phenol is anticipated to fall by 5% in 2009 due to the weakness in housing starts. If
construction picks up by the end of 2009, it will take some time to deplete inventories to comfortable levels where
production can bounce back. Exports of phenol will have to compete against new capacity, especially in Asia.
Acetone may actually be restricted in 2009 by the demand for phenol. There may be opportunities for acetone
exports that bring better prices to the market in general.

Given the incentive to produce cumene in 2009, and the demand constraints on phenol production, margins for
non-integrated producers may improve. Merchant buyers of cumene – Ineos, Mt. Vernon, Dow – may see a better spread
between phenol and cumene.

 
 
 
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PRODUCT CAPSULE: CUMENE/PHENOL/ACETONE

 
Pricing 
¢/lb 2007 2008 2009 Q1 2009 Q2 2009 Q3 2009 Q4
Phenol 69 68 48 48 49 51

Acetone 51 58 40 38 40 44

Pricing in this value chain is very formulaic and transparent. Pricing is based on benzene, primarily, which is
traded regularly on open markets. Benzene prices have fallen from $4.33 per gallon at the end of September, 2008 to
$1.60 by the end of October, 2008. Early November, 2008 remains below $1.60, and forward buys indicate it is likely to
remain in this neighborhood.
The other component, refinery grade propylene has dipped in pricing as well. Refinery grade propylene traded at
50-55¢/gal at the end of September 2008. In early November, 2008, trades are around 20¢/gal.
The reduction in feedstock prices is bound to reduce price throughout the value chain.