FocusAsia benzene may hit $1,300/t on crude

21 May 2008 05:03  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS news)--Asia’s benzene values could hit the $1,300/tonne level on record high crude values, tight supply and stronger overseas markets, said traders and producers on Wednesday.

Producers and traders in Asia have hiked benzene by 8.5% since the week ended 2 May, and prices were pegged at $1,265-1,275/tonne FOB (free on board) Korea on Wednesday, according to global chemical market intelligence service ICIS pricing.

Prices touched a 12-year high during Tuesday’s trading, with a deal heard at $1,250/tonne for July loading. On Wednesday morning, prices surged another $15/tonne on an overnight hike in crude values, said traders.

Producers and some traders were bullish and said that there was room for more increases looking at the high ceiling set by crude and naphtha values.

"In my opinion, $1,300/tonne is likely to be the cap," said a South Korean producer.

But some traders remained cautious and said that prices could remain close to the $1,250/tonne level, as some of them were wary of taking trading risks in the current volatile climate.

"I don’t think prices can go up to $1,300/tonne, its likely to remain at around $1,230-1,260/tonne level," said a Japanese trader.

The $100/tonne increases in benzene values in the past three weeks have come on the back of phenomenal increases in crude and naphtha values, along with tight supply in Asia, said traders and producers.

A tightening of supply in Asia since April had also exerted upward pressure on prices, said producers.

High naphtha prices in the past months had eroded production margins leading some South Korean and Japanese units to cut back operating rates, extend shutdowns or use lighter feedstock like LPG which yields less aromatics, said producers.

 "Although the spread with naphtha is more than $200/tonne, margins are still thin, and with the increase in crude and naphtha the variable cost of production has also gone up," the South Korean producer added.

On Wednesday, naphtha was higher at $1,064/tonne CFR (cost and freight) Japan, with the benzene-naphtha spread at $201-211/tonne.

Crude values soared past Tuesday’s $127/bbl mark to hit $129/bbl during overnight trading as a weak dollar and tight supplies of diesel fuel in combination with forecasts of higher prices supported the energy complex.

In the coming weeks, a stable-to-firm trend was likely to continue in the Asian benzene market in line with energy values and stronger US benzene market expected in June, said traders and producers.

Supply of benzene was likely to tighten in the US in June due to reduced exports from Asia in April-May, said traders and added that this would raise prices in the US and support the market here. 

For more on benzene visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Mahua Chakravarty
+65 6780 4359

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