Asian traders gamble on US benzene arbitrage

18 November 2005 05:24  [Source: ICIS news]

SINGAPORE (ICIS news)- Asian benzene shipments to the US have resumed after a three-month interval, in anticipation of US prices rising to levels significantly higher than Asian prices, producers and traders told ICIS news.

Other factors driving the trade are dwindling demand in Asia, a sharp fall in Asia-US freight rates, and availability of vessel space after shortages seen in earlier month, they added.

A South Korean producer confirmed selling a 6,000-tonne cargo to a US customer for delivery in January, 2006 and another Asian supplier is reported to have booked vessel space for a 15,000-tonne cargo.

However, the second producer is still waiting to confirm whether rbitrage would work before loading the ship, traders said.

No price indications were available for the confirmed and potential shipments.

One trader was sceptical over whether the gamble would pay off, as Asian benzene prices had begun to strengthen yesterday after falling to an 18-month low of $600/tonne FOB Korea last week on weak demand.

However, another trader contended that Asian producers had no option but to export, as "benzene will continue to be long in Asia in the near term, as demand from downstream styrene and phenol producers is likely to remain weak".

Benzene prices in Asia are currently at $640/tonne FOB Korea, a $205/tonne fall from early September.

US prices are at $2.20/gal, which translates into $660/tonne FOB USGC.

Producers and traders are banking on prices rising sharply in the US by January. One trader said US prices are expected to surge to $2.40/gal by January, .

Asia-US arbitrage came to a halt in September, as freight rates between Asia and US surged to US$90-100/tonne from $60/tonne.

However, freight rates have fallen sharply this month to $48-50/tonne for the Asia-US route.

By: Prema Viswanathan
+65 6780 4359

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