Importing Phenol (Liquid) in Bulk.....
HS Code : 29071110
The use of phenol around the world goes way back to the 1800s where it was the earliest form of anaesthetic. In the early 1900s the soap industry too started using phenol due to its slightly aromatic and acidic qualities. Also referred to as Carbolic acid, phenol is a transparent to light pink chemical which is available in the form of a liquid or a powder.
Today, phenol and its derivatives find use in the manufacturing of many household items like disinfectants as well as in the chemical industries as intermediaries. Industries where it has growing demand include pharmaceuticals, plywood, laminates and resins. Curiously, despite the growth in these industries, India manufactures only a fraction of the phenol that it consumes.
In India, the local manufacturers are not able to compete with imports vis-a-vis prices and their production is also not consistent. On the other hand, the demand is increasing by 8-10% every year, hence import volumes are also on the rise; as user industries keep rapidly growing it is natural that the demand for phenol will increase and in the absence of capacity building in domestic phenol manufacturing imports are the only option.
According to data from ICIS Market News & EY Analysis, the global supply to demand gap is expected to narrow down from 0.7 MT surplus in FY2016 to 0.3 MT in FY2020. The Indian phenol market is also expected to see an upward growth in the coming days. Data from ICIS and the International Conference on Indian Petrochem indicate that the Indian phenol market will see a growth of 64.7% to Rs.28 billion in FY2020 from Rs.17 billion in FY2012.
When it comes to imports, according to the London-based IHS Markit, India and China have shown the most impressive increase in imports of phenol over the last 10 years due to unprecedented growth in user industries.
Despite a gaping demand-supply gap, manufacturers have not been able to grab the opportunity. Available data suggests that unless India invests in capacity building the dependence on import of phenol will continue to increase in the foreseeable future. For instance, India produced just 82 kilotonne (KT) of phenol in CY2012, while the demand for the same in that year was 248 KT. In CY2015 while the demand had grown to 300 KT, India managed to produce only 82 KT of phenol. ICIS forecasts a demand of 411 KT in CY2020 and in the absence of more manufacturing units, it is but obvious that imports of phenol will shoot up. In FY2013, India imported phenol worth $257.10 million, which increased to $300.20 million in FY2015. Though imports witnessed a y-o-y decline of 16.7% in FY2016 (mostly due to the global economic slowdown), it was followed by a 16.4% y-o-y increase in FY2017.
A major boost in demand for phenol has been attributed to a growth in user industries, particularly plywood and laminates.
When it comes to sourcing countries, India’s main sources of phenol include Thailand, China, South Korea, US, Singapore and Taiwan. In FY2017, while imports from Thailand were the largest in terms of value, South Korea topped the list when it came to import volume. Saudi Arabia too is slowly emerging as a viable source for India’s phenol imports
"Consumption is on the rise, but manufacturing capacity hasn’t risen as desired"
Despite there being a great opportunity for manufacturers of phenol, large-scale domestic producers of the product remain limited – so much so that currently there are only two major manufacturers of phenol in India i.e. Hindustan Organic Chemicals Limited (HOCL) and SI Group India. Importers and trade analysts predict that a domestic manufacturing resurgence remains a distant dream. Tough in 2018 a few new manufacturers are expected to begin production, the extent to which they will reduce imports is questionable.
Phenol is a versatile industrial organic chemical which is used to produce a wide variety of chemical intermediates, including bisphenol-A, phenolic resins, etc.
Currently, domestic manufacturers cater as much as they can to the domestic market and only a small percentage is exported. Though the latest data shows an increase in export, the figure stands at less than 5% of the total annual imports. One of the main reasons for the negligible domestic production, despite the increased domestic demand, has been the constraints in the petrochemical industry in India such as absence of high-level investments, challenges in the supply value chain, disproportionate use of petroleum intermediaries and absence of better and advanced technology. The higher cost of production of phenol in India acts as a catalyst to greater imports.