20 August 2001 00:00 [Source: ICB]Benzene is facing its worst decline for many years as downstream demand collapses. However, longer-term growth is stable with extra consumption forecast in Europe to 2005
Benzene is an aromatic feedstock and over half of its output feeds ethylbenzene (EB)/styrene demand. The second largest consumer is cumene, followed by cyclohexane, aniline/nitrobenzene and alkylbenzene. Benzene is also left in refinery streams and used in gasoline as an octane enhancer, although European regulations limited its content to 1% from 1 January 2000.
Europe's current capacity is about 8.8m-8.9m tonne/year and markets are in surplus, mainly due to the 1% limit in gasoline imposed on 1 January 2000. At present, benzene is suffering the worst slump for possibly 20 years. Supply is long and demand is exceptionally low from all the derivatives, particularly the styrenic chain where polystyrene production has been cut, and consumers are lifting minimal contract volumes. Export opportunities to the US have been wiped out and the arbitrage has remained closed as the US has imported large volumes from Asia. BP has taken over Erdolchemie and last month agreed to take 51% in Veba Oel.
Contract negotiations for the last two quarters have been marked by disagreement and split settlements. Quarter three contracts finally stuck at E293/tonne, E17/tonne lower than the first deal and E87/tonne lower than quarter two. Spot prices spiralled downwards for several weeks, losing $50/tonne in July alone. Price ideas dipped below $200/tonne in mid-July but recovered slightly to $205-210/tonne fob NWE in early August. The delta with naphtha, traditionally at $80-100/tonne, completely disappeared at one point in July but clawed back to $10/tonne in early August.
The traditional production method via the distillation of light oils produced in coke manufacture has been overtaken by several routes. The main source in Europe is from pyrolysis gasoline coproduced in the steam cracking of naphtha, gasoil and condensates to make olefins. Other processes include hydrodealkylation (HDA) and the selective disproportionation of toluene (TDP). Benzene is also coproduced in BP/UOP's Cyclar process which converts propane/butane to aromatics.
Benzene is a clear, refractive liquid with a characteristic odour which is soluble in ethanol but only slightly soluble in water. It is highly flammable and burns with a sooty flame. The vapour forms explosive mixtures with air and flashback is a potential hazard. It is acutely toxic and vapour can be absorbed through the lungs or skin. It is a suspected carcinogen and a cumulative poison which builds up in the blood and body tissues.
No improvement is expected for the rest of this year. CMAI's John Bonarius is predicting 2001 growth will be down by 2.7% over 2000. Styrene demand will be about 5% less, while cyclohexane consumption is forecast to be 20% down by year end. European demand growth is about 3.5%/year until 2005. Cumene will be the fastest growing derivative at 5.6%/year, with ethylbenzene/styrene growing at 4.3%/year worldwide. Shell's new 500 000 tonne/year plant at Moerdijk, the Netherlands, is due end 2002 and will feed a downstream EB unit which currently relies on imports. Increased consumption will come from Lyondell's 640 000 tonne/year styrene plant in Rotterdam in 2003. About 1.5m tonne of extra demand is expected in western/central Europe over the next four years. Western Europe will remain a significant importer and Bonarius estimates that, by 2003, the area's deficit will be over 700 000 tonne/year. However, the Middle East has excess capacity with more coming onstream during 2003 in Saudi Arabia and Iran.
|Enichem||Porto Marghera, Italy||110|
|Porto Torres, Italy||230|
|Huntsman ICI||Wilton, UK||433|
|Repsol YPF||Puertollano, Spain||125|
*BP has 50%; **Atofina/BP; +BP has 51% Source: DewiTT/ecn
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