Benzene traders using innovative ways to solve credit crunch

04 July 2005 17:22  [Source: ICIS news]

LONDON (CNI)--Some benzene traders are once more using innovative ways to solve their credit crunch in the current booming market, barely two months after they survived one of the industry's worst price crashes, market players said on Monday.

 

“Clearly the casualties from the crash are unable to raise their own credit to carry on trading,” said one benzene producer. “But other traders are fronting deals for them to allow them access to credit lines.”

 

“We’ve been working with them to keep them afloat,” said another producer involved with a defaulting trader. “It’s not in our interests to see them go under. I’m full of admiration for what they’ve been doing to keep going, when they could easily just give it all up.”

 

The sudden crash in benzene prices in April and May caused a crisis amongst Europe’s trading community.

 

Rotterdam spot prices fell from $1,180/tonne to $630/tonne (47%) free on board (FOB) in the space of seven weeks, according to assessments by global market intelligence and price reporting service ICIS-LOR, a CNI sister company.

 

Traders who had been holding long positions in a rising market suddenly found themselves in a cash crisis and have been struggling to survive since then.

 

The market turned around at the end of May, and at the end of June hit $900/tonne FOB, resulting in a 38% hike in the July benzene contract of Euro730/tonne FOB Northwest Europe (NWE).

 

Producers and consumers of benzene who had long complained about the speculative behaviour of traders are now concerned to keep them alive.

 

The number of independent traders in benzene had already decreased in recent years, as major trading houses like Hamburg, Germany-based Helm pulled out of the market due to its notorious unpredictability.

 

Other trading houses collapsed, and the number of significant independent European-based traders operating in the benzene space is now no more than seven.

 

There was debate on the sidelines of the European Petrochemical Luncheon (EPL) meeting on 30 June-1 July as to whether the fallout from the May crash would discourage traders from taking speculative benzene positions in the current rising market.


By: Barbara Ortner
+44 20 8652 3214



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