Feedstock Report: Benzene and Styrene

14 November 2005 00:01  [Source: ICB Americas]

POOR DOWNSTREAM demand and falling crude oil prices have significantly undercut benzene prices. While the slowdown in the styrenics chain has accounted for much of the decline in benzene prices, other end-uses have also seen decreasing demand.

Styrene monomer production has been severely compromised since late September because of difficulties sourcing raw materials, especially ethylene and in some cases natural gas. “Styrene operating rates have been at or below 75 percent of nameplate capacity,” says Chuck Venezia, vice president of benzene and derivatives for Houston-based DeWitt & Company.

The fall-off in styrene production led to a 75 cent per gallon decline in benzene contract prices. November’s contract stands at $2.35 per gallon. Spot prices have dipped from almost $3 per gallon in early October to below $2.25 per gallon in mid-November. “The moderation in benzene pricing since April has been helpful in that it is countering cost increases driven by natural gas and ethylene,” says Bob Snyder, vice president, styrene monomer for Nova Chemicals.

Aside from styrenics, benzene has also experienced a slowdown in the phenol chain. “The phenol chain has been relatively weak as well,” says Venezia. He attributes it to poor downstream demand, particularly polycarbonate. “People are very reluctant to build inventories with such high benzene and propylene prices,” adds Venezia.

Aside from a slide in prices, benzene producers are also wary of rising inventories. NPRA inventory numbers showed 170 million gallons in inventories in September, which is the highest level in recent memory, according to Venezia.

“What is worrisome is that you had three fairly significant plant outages due to Katrina and very little direct impact on consumption units,” he notes. “Then Rita hit, but that was late September, which was close to the reporting period, so it should not have had a major impact on inventories. Since that time, styrene operating rates have been very low.”

Despite the decline in benzene prices, styrene monomer producers have been actively attempting to raise prices to account for record high ethylene and natural gas prices. “Recent increases in styrene pricing have been driven by rising costs,” says Snyder. “Generally, we have been successful in raising prices in order to cover these costs and need to continue to raise prices in order to restore acceptable margins to our business.”

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