FocusExcess S Korea benzene en route to US

28 November 2008 06:38  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS news)--South Korea will export more benzene to the US in November and December to reduce high regional inventory levels although the arbitrage window was not open on paper, said traders and producers on Friday.

An estimated 150,000-200,000 tonnes of benzene would be shipped during this period, they added. One Korean seller confirmed this.

"Due to the desperate situation in Asia, they needed to export," the Japanese trader added.

The arbitrage window remained closed on paper as US prices were $41-71/tonne (€32-55/tonne) lower than Asia on Wednesday at $0.90-1.05/gal FOB (free on board) Barges or $269-314/tonne FOB Barges.

Asian spot values were at $340-355/tonne FOB Korea on Friday, according to global chemical market intelligence service ICIS pricing.

US values need to be higher than Asia by an estimated $100/tonne for freight costs to be covered and the arbitrage to be viable.

Asia as whole is a net exporter of benzene to the US, with regular monthly shipment volumes of 40,000-50,000 tonnes, but South Korea alone had exceeded these levels in the past two months.

In October, South Korea sent 57,453 tonnes of benzene to the US, making up about 50% of its total 111,577 tonnes exports of the chemical, according to Korea International Trade Association (KITA).

Some of those exporting in this period were at a high risk of losing money as about 50% of the total shipments were unsold. The sellers were planning to sell in the US market after landing, said a producer and a trader.

“Traders who are exporting to the US have not decided how they will manage the situation and have not found a buyer,” said another Japanese trader.

Tanks in South Korea and Japan were reported to be near full levels as end-users across the region continued to cut contract volumes or refused term cargoes, said traders and producers.

Styrene monomer (SM) and phenol producers were still running their plants in South Korea, Japan, Taiwan and parts of southeast Asia at reduced levels of about 70-80% as they battled the impact of slowing derivatives demand following the global economic slowdown, said SM and phenol producers.

The dramatic fall in benzene values from a high $900/tonne FOB (free on board) Korea levels in early October had also wiped out gains and eroded confidence among players, said traders.

($1 = €0.77)

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By: Mahua Chakravarty
+65 6780 4359

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