FocusAsia benzene hits 21-month low

08 October 2008 05:56  [Source: ICIS news]

Asia benzene hits 21-mth low on weak economyBy Mahua Chakravarty and Clive Ong

 

SINGAPORE (ICIS news)--Asia’s benzene prices fell to a 21-month low and are poised to drop below the $900/tonne FOB Korea level if crude values continue to fall and weak demand persists from key derivative segments, said Asian traders and a Korean producer on Wednesday.

 

Prices fell to $900-915/tonne FOB (free on board) Korea at the close of Tuesday’s trades, the lowest seen since 26 January 2007, according to global chemical market intelligence service ICIS pricing. In the past two weeks, ICIS historical data showed benzene values were down by a whopping $215-220/tonne or 19%.

 

“It is possible for benzene to go lower but I’m not sure by when,” said a South Korean producer.

 

Another aromatics trader in Singapore pointed towards the weakening global economy and falling oil prices as the underlying cause of the sharp decline in benzene prices with limited hope of any recovery in the near future.

 

Benzene in Asia takes its cue from crude prices, which recently fell below the psychological $90/bbl level and hence was cited as the key factor dragging the Asian aromatics market lower, said traders. US light crude futures on NYMEX hit $88/bbl on Monday night.

 

Demand for benzene in Asia had been persistently weak from key downstream segments like styrene monomer (SM), cyclohexane and phenol, traders added.

 

“They hesitate to buy as they see it is already the start of a recession and there are many uncertainties,” said the South Korean benzene producer. He added that the sharp corrrection in benzene was being brought about by the weak derivatives styrenics, caprolactam and nylon markets which had been facing slower export orders in China.

 

Demand from the SM segment, which accounts for about 50% of Asia’s benzene demand, has been one of the weakest in the last three months and is expected to decline further, said traders and a producer.

 

Operating ratios among key SM producers in Japan averaged 60-70% while Korean units were on the whole at around 70-80%. In view of waning demand, most suppliers anticipated lowering rates further in November and December, said SM producers.

 

Going into the fourth quarter, demand for SM in Asia is expected to remain feeble, said SM traders and producers. The widening credit crisis in the US and Europe had reduced orders for finished goods to China. Consequently consumption of styrenic resins had dropped sharply since September, resulting in slower demand for SM.

 

As a result, cutting back further on benzene operating rates in coming weeks was probably inevitable going forward, said the South Korean benzene producer. At present, plants in South Korea and Japan were estimated to be operating at about 80%.

 

 

By Mahua Chakravarty

 

For more on benzene, styrene visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to
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By: Mahua Chakravarty
+65 6780 4359



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