East-to-West arb window opens for benzene

13 February 2008 07:11  [Source: ICIS news]

By Mahua Mitra

SINGAPORE (ICIS news)--The arbitrage window for shipping benzene to the US has opened, allowing Asia to bring excess volumes outside the region, traders and a producer said on Wednesday.

In Asia, benzene prices were notionally assessed $10/tonne lower on Wednesday morning at $1,050-1,060/tonne FOB (free on board) Korea, according to global chemical market intelligence service ICIS pricing.

US February benzene spot prices were much higher at $3.77-3.79/gal FOB (free on board) HTC (Houston-Texas City) or $1,127-1,133/tonne FOB HTC overnight Tuesday, $73-77/tonne higher than Asia.

Meanwhile, benzene prices were assessed at $1,170-1,180/tonne CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp), $120/tonne higher than Asian values.

A price gap of about $70/tonne with the US and $100/tonne with Europe from Asia, with the latter being lower, was considered as the estimated freight costs from Asia to the other regions.

Asia is a net exporter of benzene to the US, with an estimated 40,000-50,000 tonnes shipped every month. Since August 2007, arbitrage had closed with the US, resulting in a build-up of supply in this region.

Arbitrage from Asia to the US, as well as to Europe, was deemed viable although discussions were largely focused on shipping to the US, traders said.

An estimated 50,000-60,000 tonnes of benzene could be shipped in February from Asia to the US, with about 15,000 tonnes of the total volume meant for term commitments, traders and a producer said. 

About three traders and one producer said, on conditions of anonymity, that they were discussing exporting benzene to the US.

A trader could be discussing shipping benzene to Europe but narrow margins and freight costs could pose difficulties, a producer said.

The arbitrage opened largely due to the sudden upturn in US and Europe prices from late last week, traders said.

Demand for benzene in the US market had surged partly due to talks of increased exports of styrene monomer (SM) from the US to Europe, a producer said.

An estimated 70,000 tonnes of SM was expected to move from the US, he added.

In Europe, supply was tight while demand was firm, resulting in a price upturn. Sources in Europe said that the market had totally overestimated supply availability for the first months of 2008.

Julia Meehan contributed to this story.

By: Mahua Chakravarty
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