Market pulled by feedstock

24 September 2001 00:00  [Source: ICB]

The tension between rising feedstock costs and the prospects for downstream demand is intensifying in the European benzene market, complicating quarter four contract negotiating positions. 'Feedstock numbers point to a higher quarter four contract price', one leading producer argues. However, players still say there are no signs of an upturn in derivatives demand.

Buyers say they will keep the cuts in their requirements in place for Q4. These cuts were implemented throughout quarter three (ECN, 20 August 2001).

Players confirm that the market has altered during the last two months as upcoming shutdowns in Germany, the UK and the Netherlands, coupled with the movement of quantities of benzene to the US, have begun to tighten European supplies.

Around 40 000 tonne of benzene are said to have been booked for shipment from NWE totheUSduringSeptember. Price in the US are at around $1.04/gal and arbitrage opportunities are open. Industry sources say the US has been able to absorb the excess product due to the closure of swing capacity as well as the cuts to cracker operations, which have helped achieve a slight recovery in prices and tighten the market.

European players admit they expect quarter four contract negotiations to be 'difficult' because of the uncertainty in the market following the terrorist attacks on the US.

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