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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