Product Profile: Benzene

23 August 2004 00:01  [Source: ICB]

Buyers are grappling with soaring prices and a tightening market. Forecast short supply will keep prices above trend

Uses

Benzene’s primary consumption is in ethylbenzene/styrene, followed by cumene/phenol, and then cyclohexane, chlorobenzene/nitrobenzene and alkylbenzene. It is also used in maleic anhydride production and as a chemical intermediate to make anthraquinone, hydroquinone, benzene hexachloride, benzene sulphonic acid, and other products used in drugs, dyes, insecticides and plastics.

Supply/demand

Demand in Europe has improved this year and consumers have been lifting maximum contract volumes. Players say consumption into styrene/polystyrene and phenol is strong while cyclohexane is steady. But, because of the continuing high price of benzene, some suppliers have reduced polymer output and further cuts downstream may be made in the second half if benzene’s escalation continues and derivatives margins do not improve.

The market is tightly balanced following outages in July. Supply is expected to ease in September when several styrene plants have planned shutdowns. Players believe any excess benzene will be soaked up by the US, where supply is short and demand healthy.

Pricing

Prices have reached record highs this year. European monthly contracts hit €895/tonne in August, while spot levels have soared with August business being done mid-month at $1130-1140/tonne, and September prices tracking $10/tonne lower. The monthly settlement is now regarded as the reference price within the industry. Increasing interest is being shown in a futures market to enable players to hedge against pricing volatility.

The delta over naphtha, historically at $100-200/tonne, has also reached unprecedented levels. With naphtha at $415-420/tonne in mid-August, the premium has widened to well over $400/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 usually run to maintain the supply balance, but it 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 that converts butanes and propanes to aromatics. To date, only one plant in Saudi Arabia uses the technology.

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 that builds up in the blood and tissues and it is suspected to be carcinogenic.

Outlook

Demand for benzene, of around 4%/year globally, is growing faster than supply. Despite several new projects, mostly in Asia, there could be a 4m tonne/year world deficit by 2010, ensuring that prices will remain high for some years.

In Europe, where demand grows around 2%/year, no new capacity has been officially announced. Although the European Union’s 2005 aromatics legislation will prompt extra supply, more will be needed. However, there is limited scope for new investment. Refineries are unlikely to invest and pygas supply is trailing demand as new (Middle East) crackers are based on ethane. Players believe new extraction capacity will be added, but companies need to be confident first that prices will remain high enough to justify investing.

WEST EUROPEAN BENZENE CAPACITY, ’000 TONNE/YEAR

Company	Location	Capacity
AP Feyzin	Feyzin, France	110
Aral	Gelsenkirchen, Germany	250
Atofina	Carling, France	320
	Gonfreville, France	200
BASF	Antwerp, Belgium	250
	Mannheim, Germany	320
Borealis	Porvoo, Finland	130
BP	Geel, Belgium	60
	Grangemouth, UK	295
	Gelsenkirchen, Germany	410
	Cologne, Germany	370
Cepsa	Algeciras, Spain	245
	Huelva, Spain	170
ConocoPhillips	Immingham, UK	200
Dow Chemical	Böhlen, Germany	320
	Terneuzen, Netherlands	915
Erdol-Raffinerie-Emsland	Lingen, Germany	75
ExxonMobil	Botlek, Netherlands	600
FinaAntwerp Olefins	Antwerp, Belgium	170
Galp Chemical	Oporto, Portugal	80
Gexaro*	Lavéra, France	200
Holborn Europa Raffinerie	Hamburg, Germany	65
Huntsman	Wilton, UK	510
OMV	Burghausen, Germany	160
PCK	Schwedt, Germany	70
Polimeri Europa	Porto Marghera, Italy	110
	Priolo, Italy	440
	Sarroch, Italy	50
Repsol YPF	Puertollano, Spain	125
Sabic Euro-Petrochemicals	Geleen, Netherlands	350
Shell	Godorf, Germany	510
	Moerdijk, Netherlands	550
	Stanlow, UK	240
Shell & DEA Oil	Heide, Germany	120
	Wesseling, Germany	160
Syndial	Porto Torres, Italy	190
Total	Antwerp, Belgium	250
	Gonfreville, France	160
VFT Belgium	Zelzate, Belgium	90
SOURCE: ECN/CNI	* Atofina/BP

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