Price slump closes delta with naphtha

18 June 2001 00:00  [Source: ICB]

The recent slump in European benzene spot prices, coupled with the relative strength of naphtha, has eaten away margins and reduced the delta between the two commodities to a low of $26/tonne, compared to a traditional 'comfort' figure of $100/tonne.

While spot benzene is trading at $280-290/tonne fob NWE, naphtha prices settled at $258-260/tonne cif last week and producers are now expressing concern about the sustainability of the situation.

The slide in benzene prices comes at a crucial time for European producers as they approach quarter three contract negotiations. One leading producer said: 'Talks may begin next week but we will not be rushed into an early settlement.'

The European market is lengthening as all the outed crackers are back in production. Meanwhile, demand from the styrenic chain is exceptionally low, following the cutbacks implemented by European styrene and polystyrene producers (ECN 28 May 2001).

Ethylbenzene and styrene represent 48% of European benzene demand and CMAI consultant John Bonarius said: 'There will be no improvement in benzene pricing until there is an improvement in the polystyrene and expandable polystyrene chains.'

Imports from Korea and the Middle East are contributing to the build-up of benzene supplies. One large shipment is due in from Korea during the second half of June and there are unconfirmed reports that some Saudi material is also on its way.

In addition, there are no export opportunities to the US. The length of the US market, which is also under pressure because of large imports from Asia, was reflected in the settlement of June contracts at $1.13/gal fob US Gulf, against $1.17/gal in May, with spot prices still weakening in the $0.97-1.05/gal range.

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