FocusAsia benzene supply seen to rise further

16 January 2008 07:08  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS news)--The excess supply of benzene in Asia may worsen from March to April due to turnarounds in regional downstream styrene monomer (SM) plants, industry participants said on Wednesday.

An increase in the already amply-supplied Asian market was expected as demand from SM producers had been forecast to fall, traders and producers said.

Some producers and traders feared that the supply was likely to rise in the key market of Japan, and as a result in Asia, due to several turnarounds in major SM plants operated by Idemitsu, Asahi Kasei and Nippon Steel.

“I forecast that the March to April benzene balance in Asia will get worse, especially in Japan,” said a Japanese benzene producer.

From the list of Japanese SM plants planning turnarounds, Asahi Kasei alone expects its benzene demand to slip more than 30,000 tonnes from March onwards, said a company source.

Asahi Kasei will shut down its No 2 plant, which produces 300,000 tonnes/year of SM, for 40 days from 10 March, he said. The company will simultaneously shut down the No 3 unit, which has a capacity of 390,000 tonnes/year of SM, from mid-March for 20 days, he added

The company would also shutdown a derivative cyclohexane plant from mid-March for 40 days. The facility produces 180,000 tonnes/year of cyclohexane.

The turnaround season is expected to last from February to April in Japan, with Idemitsu’s 210,000 tonne/year Chiba unit, Nippon Steel’s 190,000 tonne/year Chiba unit and Nippon SM’s 230,000 tonne/year Oita plant taken offline.

In this scenario, shipping benzene to the US was at the top of the list among traders and producers. They hoped that the US market would remain on a firm trend and ensure that the window remained open.

“If the US market does not improve, then the Asian market might crash,” a producer said.

The US-Asia spread was calculated at $55-61/tonne, still lower than the $70/tonne gap which would swing the arbitrage window open.

The spread was based on the difference between Asian values assessed on Wednesday at $970-985/tonne FOB (free on board) Korea and the overnight prices in the US at $3.45-3.48/gal FOB HTC (Houston-Texas City) or $1,031-1,040/tonne FOB Korea.

The US and Asia price spread had been in narrow or negative territory in the past six months, making it unrealistic to ship benzene to the US. This has also resulted in creating an excess supply of benzene in Asia.

By: Mahua Chakravarty
+65 6780 4359

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