Minsheng Securities: The European phenol industry may face a wave of shutdowns, which is expected to stimulate growth in domestic industry production and sales

According to the report from Minsheng Securities, recently, based on reports from the Petrochemical Federation and other institutions, the world's largest phenol and acetone producer, INEOS, plans to permanently cease production at its phenol production facility in Gladbeck, Germany. INEOS attributes the closure of the plant to the high energy costs in Europe and punitive carbon tax policies, which have led to a loss of competitiveness for Europe in the competition with Chinese imports of phenol and global supply surplus. From the historical price cycle over the past five years, domestic phenol prices are in a bottoming process. Although phenol prices are currently at historical lows, as overseas core phenol production capacity gradually exits the market due to declining competitiveness, it is expected to further stimulate and drive the growth of domestic enterprises' production and sales, benefiting the performance improvement of domestic phenol and acetone producers. The main viewpoints of Minsheng Securities are as follows: Event: According to data from Longzhong Information on July 7, the phenol price in East China was 6,550 yuan/ton, with an average price of 6,562 yuan/ton since July. The average domestic phenol price from January to June 2025 is projected to be 7,026 yuan/ton, and the current domestic phenol price is at the lowest level since June 2023. From 2021 to 2024, the average phenol price in East China was 8,859 yuan/ton, 10,023 yuan/ton, 7,734 yuan/ton, and 7,914 yuan/ton, respectively. From the historical price cycle over the past five years, domestic phenol prices are in a bottoming process. INEOS's closure of European phenol capacity may lead to a wave of shutdowns in the European phenol industry Recently, according to reports from the Petrochemical Federation and other institutions, the world's largest phenol and acetone producer, INEOS, plans to permanently cease production at its phenol production facility in Gladbeck, Germany. The plant, established in 1954, has an annual production capacity of 650,000 tons of phenol and 400,000 tons of acetone, and was once one of the largest phenol facilities in the world. The company attributes the closure of the plant to high energy costs in Europe and punitive carbon tax policies, which have led to a loss of competitiveness for Europe in the competition with Chinese imports of phenol and global supply surplus. Sir Jim Ratcliffe, Chairman of INEOS Group, commented: “This is the result of the complete lack of energy competitiveness in Europe and the blind implementation of carbon taxes, which is leading to large-scale deindustrialization across the continent. Unless regulators wake up and take action, Gladbeck will not be the first, and certainly will not be the last.” Domestic phenol production capacity growth has significantly slowed, with accelerated import substitution and export processes From 2021 to 2024, domestic phenol effective production capacity increased from 3.33 million tons/year to 6.57 million tons/year, with a CAGR of 25.43%. Especially between 2021 and 2023, the compound growth rate of domestic phenol capacity reached 37.99%. In 2024, although domestic phenol capacity continues to grow, the growth rate has decreased to 3.57%. From 2021 to 2024, domestic phenol apparent consumption increased from 3.08 million tons to 5.24 million tons, with a CAGR of 19.37%; domestic phenol imports decreased from 522,300 tons to 249,600 tons, with a CAGR of -21.82%; domestic phenol exports decreased from 135,100 tons to 79,100 tons, with a CAGR of -16.35%, among which the export growth rate in 2024 reached as high as 184.81% From the development trends in recent years, the domestic phenol industry has experienced a rapid expansion phase from 2021 to 2023. Starting in 2024, the growth rate of production capacity is expected to gradually slow down, and there has been a significant reduction in phenol imports from overseas. Excluding the high base effect caused by the disruption of overseas supply chains in 2021, a significant growth is expected to begin in 2024. Investment Recommendations Although phenol prices are currently at historical lows, the gradual exit of overseas core phenol production capacity due to declining competitiveness is expected to further stimulate and drive the growth of domestic enterprises' production and sales, benefiting the performance improvement of domestic phenol and acetone production companies. Major related companies and their corresponding phenol production capacities: Weiyuan 440,000 tons/year, Huayi Group 160,000 tons/year, Wanhua Chemical 400,000 tons/year, Sinochem International 400,000 tons/year. It is recommended to pay attention to the following stocks: Weiyuan (600955.SH), Huayi Group (600623.SH), Sinochem International (600500.SH), Wanhua Chemical (600309.SH). Risk Warning Downstream demand growth may be less than expected; overseas capacity exit may be less than expected; new domestic phenol production capacity