Europe benzene at five-year low on supply glut

27 October 2008 17:05  [Source: ICIS news]

LONDON (ICIS news)--Spot benzene in Europe was heard to have traded at a flat margin over naphtha on Monday, putting it at five-year lows and 67% lower than at the time of October contract settlements on the back of incredibly weak demand.

“There is only one explanation and that is that there is too much benzene around,” said a trader source.

“Producers and buyers want to reduce their inventories. I don’t see how it can move down further but it’s hard to say where the bottom is. If energy can fall further then so can benzene.”

Added a source at a major consumer: “For product, you need to sell it, but nobody wants it. I don’t see much demand there.”

A spot benzene trade with November loading was widely rumoured at $390/tonne (€312/tonne) CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp), with global chemical market intelligence service ICIS pricing valuing the market at $380-400/tonne CIF ARA.

At the same time, ICIS pricing assessed spot naphtha in Europe at $393-403/tonne CIF ARA.

A trade at $390/tonne CIF ARA would mark the lowest point seen by ICIS pricing since the week ending 25 July 2003, when trading was recorded within a $382-405/tonne CIF ARA range.

As little as a week previously, players had discussed the rare event of benzene trading at $100/tonne above naphtha, attributing it to weak demand. A producer source said this margin was “not supportable”.

Added a source at a distributor and trader: “I have a feeling that the margins and correlations between markets are not the drivers here.

“We don’t see many buyers, [and there are definitely sellers out there].”

October benzene contracts had settled at a dollar concept based on spot values of $1,171/tonne FOB (free on board) NWE (northwest Europe) converted to a euro price of €797/tonne FOB NWE at the contemporary exchange rate of €1 = $1.47.

A trade at $390/tonne CIF ARA would represent a $781/tonne, or 67%, drop. At current exchange rates the dollar value would equate to €312/tonne CIF ARA, or 61% lower than the October contract price.

“We don’t expect a significant drop, we know there will be a probably unprecedented drop,” said the consumer source.

($1 = €0.80)

For more on benzene visit ICIS chemical intelligence

To discuss issues facing the chemical industry go to ICIS connect

By: Peter Salisbury
+44 20 8652 3214

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