11 November 2005 18:55 [Source: ICIS news]
The benzene-to-crude oil price ratio was 1:1.52 on Friday morning, well below the 1:1.70 ratio that that many market players see as a support level for benzene spot prices.
Based on average November benzene spot prices of $2.13 (Euro1.82)/gallon free on board, US Gulf and the December New York Mercantile Exchange (Nymex) crude oil futures contract settling at $58.81/bbl on Thursday, benzene was about 1.52 times the Nymex crude oil benchmark price.
Historically, benzene spot prices tend to rebound shortly after falling to or below 1.70 times crude oil prices, several traders said. Benzene prices, however, have remained well below this traditional support level since 11 October, according to historical data compiled by global price reporting and market intelligence service ICIS-LOR.
Benzene spot prices are low relative to crude mainly due to reduced consumption by styrene monomer (SM) producers in the wake of Hurricane Rita.
With all US Gulf SM plants concentrated in the upper Texas and Louisiana coastal regions, suppliers shut down plants on 21-22 September prior to Rita making landfall on 24 September. With similar shutdown measures affecting ethylene production, most SM producers remained down an average of 10 days following Rita.
Benzene and ethylene are the two major raw materials used to manufacture SM.
Some market players estimated that at least 600,000 tonne of US Gulf SM production was lost during the plants’ hurricane-related downtime. The loss in SM production resulted in an estimated 480,000 tonne fall drop in benzene consumption. Although not all of this product would have been purchased on the spot market, traders estimated that about 20,000-25,000 tonne of spot material was not consumed by SM producers because of the outages.
Relatively low operating rates at US Gulf SM plants during the past four weeks is another reason the benzene-to-crude ratio has remained below 1:1.7, market sources said. Limited ethylene supplies have kept most US Gulf plants running below 80%, according to supplier sources.
SM producers said their main concern throughout October was sourcing enough ethylene to operate plants above 70%. Almost halfway through November, however, SM makers said that dealing with reduced downstream demand has become their primary concern.
An example of reduced SM consumption is in tyre production. Goodyear Tire & Rubber has slowed tyre production in ?xml:namespace>
In addition to reduced domestic consumption, there has been much less SM spot product moving from the US Gulf to Europe and Asia Pacific, making it difficult for SM producers to justify operating rates above 80% over the past month.
Some market sources say the
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections