FocusAsia benzene inventory to fall on US trade

07 November 2008 08:32  [Source: ICIS news]

By Mahua Chakravarty

 

SINGAPORE (ICIS news)--Oversupply in the northeast Asian benzene market is expected to decline in the coming weeks on the back of heavy exports to the US from South Korea this month despite the closed arbitrage window, market sources said on Friday.

 

An estimated 100,000 tonnes could be exported in November, with two traders and one Korean producer heard to be the sellers, said a Singapore-based trader.

 

Asia is a net exporter to the US with monthly exports estimated at about 40,000-50,000 tonnes on spot and contract basis.

 

The heavy exports seen in November may deplete tanks levels in South Korea and Japan in the coming weeks, and may support the spot market, said a broker.

 

On paper, the arbitrage window between Asia and US were closed as US prices were $98-103/tonne higher than Asian spot values, based on January US prices being at $1.60-1.65/gal FOB (free on board) or $478-493/tonne FOB, said a broker and a trader.

 

Overnight US November prices were at $1.59-1.62/gal FOB Barges or $475-484/tonne FOB Barges.

 

A spread of about $100-110/tonne is needed between the two region’s prices for arbitrage to open, said a broker.

 

Benzene supply in northeast Asia had risen in the past weeks, causing prices to plummet 61% to $380-390/tonne FOB (free on board) Korea on Friday from $985-995/tonne FOB Korea on 3 October, according to global chemical market intelligence service ICIS pricing.

 

Demand was weak as key downstream styrene monomer (SM) and phenol producers across the region were reported to be running plants at reduced rates due to poor derivatives market conditions.

 

Some Japanese producers could be exporting with some of the volumes coming to South Korea first, from where the cargoes would be shipped out of Asia, said a Korean producer.

 

It was not clear exactly how much of the total quantity had been fixed, but talks of a number of concluded fixtures have been circulating in the market, he added.

 

Shipping fixtures totalling to 28,000 tonnes were reported for exports from South Korea and Japan to the US in November, according to third-party sources.

 

Two shipping fixtures totalling 21,000 tonnes of benzene bound to the US Gulf from South Korea were reported, with freight costs at $108/tonne. There was also another fixture for a 7,000-tonne cargo to be shipped in November from Japan to the US, with freight costs at $116/tonne.

 

Enquiries for another 6,000 tonnes of November shipment from South Korea to the US were also reported being discussed.

 

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By: Mahua Chakravarty
+65 6780 4359

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