The global phenol and acetone markets are set to face ongoing oversupply challenges in 2026, driven by large-scale capacity additions in China and ongoing demand weakness across Europe and the US. Struggling margins among producers are expected to play a role in any alterations to regional supply, withing rising concerns over supply uncertainty in Europe.

“Plant operating rates are expected to remain low during 2026, although some producers have been at operational minimums and will be unable to reduce rates any further,” said Yazmine Khan, director of global phenolics analytics at S&P Global Energy CERA. “The market is still awaiting clarity on cyclohexanone operations at Fibrant following an announcement that they would stop caprolactam production at their Geleen site, where the company has been consuming an estimated 120,000 mt of phenol per year.”

Despite this, an ongoing outage at BASF’s caprolactam facility in Ludwigshafen, which produces caprolactam directly from benzene via cyclohexane and cyclohexanone, has created greater demand for caprolactam produced from phenol, providing a short-term outlet for other European producers, including Fibrant, who market participants said would continue to produce caprolactam, at least until BASF restarts.

While Khan estimates that European phenol demand has fallen nearly 30% since 2019 and will decline by around 1% annually through 2030, some producers still expect a modest near-term boost from Eastern Europe following Orlen’s plant closure. However, this was tempered by rising Middle Eastern imports, with Saudi volumes up 25% during the first eight months of 2025, and expectations for an “aggressive” pricing strategy in 2026 to gain greater market share.

Trade dynamics in India are likely to remain challenging, with the market undergoing a structural shift due to changing trade preferences and payment terms following US sanctions on some of the key phenol and acetone importers.

“The acetone market fundamentals would continue to stay bearish in the near term, while phenol could remain volatile,” a downstream buyer said.

Moreover, both acetone and phenol in India are likely to remain impacted by any antidumping duty investigations.

While rationalization trends have emerged in Europe, no similar capacity adjustments have been reported in the US, which is poised to continue pressuring margins amid subdued demand.

US acetone and phenol producers are bracing for continued weak demand through the first half of 2026, with contract negotiations revealing suppliers willing to offer deeper discounts to secure volume amid persistent pressures, according to market participants. US operating rates were heard to be in the low 70% range during 2025, with minimal changes anticipated in the coming year.

“Demand is expected to remain flat moving into 2026,” a phenol producer said, as current phenol demand was below normal seasonal lows, with participants seeking to reduce inventories.

Contract talks for 2026 highlight the challenging market dynamics, with producers describing the situation as "death by a thousand cuts" due to the compounding market pressures of tariffs, interest rates, and general economic uncertainty that weigh on demand.

In the feedstock cumene market, participants are negotiating the transition from refinery-grade propylene to polymer-grade propylene pricing formulas, with debates continuing over a discount ranging from 5-30 cents/lb. However, some market participants are advocating for a percentage-based discount mechanism instead of fixed cent/lb differentials.