Product Profile: Benzene

05 May 2003 00:00  [Source: ICB]

Last year was a time of recovery and fundamental change in Europe. Producers continue to grapple with market volatility and unpredictability

Uses

Benzene's main consumer, taking about 53% of output, is ethylbenzene/styrene, followed by cumene/phenol with about 18%, then cyclohexane and aniline/nitrobenzene. It is also used in the production of maleic anhydride, alkylbenzenes and chlorobenzenes.

Supply/demand

Benzene markets recovered last year after a disastrous 2001. However, in Europe, 2002 was marked by a high degree of unpredictability and volatility, as well as some fundamental changes in market dynamics, as an alternative pricing scheme emerged. Demand has been fairly strong in the first quarter but is now slowing, particularly from styrene, where producers are said to be cutting back output as downstream polymer markets slacken. Phenol and cyclohexane demand is still reported to be healthy.

Supply is improving and returning to balance after a tight first few months due to turnarounds and production problems. The resulting spike in spot prices has attracted imports from the US and Korea for arrival in late April or May. Shell started up a new extraction unit in Moerdijk, the Netherlands, in late 2002. It closed a 80 000 tonne/year plant in Berre, France, at the end of February.

Pricing

European second quarter contracts have initially settled at E525/tonne, up E70/tonne from quarter one, although some buyers are still resisting. Monthly contracts were agreed at E548/tonne in April, up from E525/tonne for March. Support has gathered behind the monthly settlement which has been in place since early last year. However, big consumers are still opting for the stability of a quarterly agreement and both systems continue to run in parallel.

Spot levels peaked at $650/tonne in March after a quarter of very volatile feedstock prices. Latest spot deals were reported at $320-335/tonne fob NWE, having dropped sharply from $420-430/tonne a week earlier. The spread with naphtha has also improved. With naphtha continuing to weaken, reaching $210-215/tonne in late April, and benzene contracts at $562/tonne, the delta has widened to over $300/tonne.

Technology

The main source of benzene production in Europe is from pyrolysis gasoline (pygas) co-produced in the steam cracking of naphtha, gasoil or condensates to make olefins. Another source is the selective disproportionation of toluene, where benzene is co-produced in the manufacture of a paraxylene-rich xylenes stream. Hydrodealkylation of toluene is a third process and units are normally run to maintain the balance of supply. However, this is a high-cost route and benzene prices need to be high enough to encourage production. Benzene is also co-produced in BP/UOP's Cyclar process, which converts butanes and propanes to aromatics.

Health and safety

Benzene is a clear, highly flammable liquid. Flashback is a hazard because of its heavy vapours. It is acutely toxic and vapour can be absorbed through the lungs or skin. It is a cumulative poison, which builds up in the blood and tissues and is a suspected carcinogen.

Outlook

There is plenty of capacity available to meet demand which is growing at about 2%/year in Europe, and 3-4%/year globally. CMAI predicts world demand to reach over 40m tonne in 2007, a rise of 7.5m tonne on 2002. Europe will see increased consumption from Lyondell's 640 000 tonne/year styrene unit in Rotterdam, the Netherlands, which is due online in the second half of this year.

Western Europe will remain a net importer. The Middle East will remain a major supplier and will increase its exports to the region by over 100 000 tonne by 2006. New capacity is due onstream in Iran and Kuwait in 2005 but, from 2006, new derivative plants are scheduled to start production and exports from the Middle East will decrease.

WEST EUROPEAN BENZENE CAPACITY, '000 TONNE/YEAR

Aral	Gelsenkirchen, Germany	200
Atofina	Carling, France	320
	Feyzin, France	110
	Gonfreville, France	200
BASF	Antwerp, Belgium	250
	Mannheim, Germany	320
Borealis	Porvoo, Finland	130
BP	Grangemouth, UK	295
	Koln, Germany	240
Cepsa	Algeciras, Spain	245
	Huelva, Spain	170
ConocoPhillips	Immingham, UK	200
Dow Chemical	Bohlen, Germany	320
	Terneuzen, Netherlands	915
EniChem	Porto Torres, Italy	160
Erdol-Raffinerie-Emsland	Lingen, Germany                  75
ExxonMobil	Botlek, Netherlands	600
FinaAntwerp Olefins	Antwerp, Belgium               170
Gexaro*	Lavera, France	200
Huntsman Petrochemicals	Wilton, UK                            435
OMV	Burghausen, Germany	160
PCK	Schwedt, Germany	70
Petrogal	Oporto, Portugal	80
Polimeri Europa	Porto Marghera, Italy	110
	Priolo, Italy	440
	Sarroch, Italy	50
Repsol YPF	Puertollano, Spain	125
Ruhr Oel	Gelsenkirchen, Germany	370
Sabic EuroPetrochemicals	Geleen, Netherlands         350
Shell	Godorf, Germany	510
	Moerdijk, Netherlands	500
	Stanlow, UK	240
Shell & DEA Oil	Heide, Germany	120
	Wesseling, Germany	160
TotalFinaElf	Antwerp, Belgium	250
	Gonfreville, France	160
VFT Belgium	Zelzate, Belgium	60
* Atofina/BP
Source: ECN/CNI

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