Europe Oct benzene expected down $90/t on lower spot values

30 September 2009 12:58  [Source: ICIS news]

Europe benzene contract likely to settle downBy Madelon Ten Cate

LONDON (ICIS news)--The European October benzene contract price was likely to settle down by around $90/tonne following lower spot values throughout September as supply increased and prices in other regions weakened, sources said on Wednesday.

“I calculated 21 transactions yesterday with a weighted average of $735/tonne,” a benzene producer said.

A broker added: “I would put [the October contract price] somewhere around that level.” A trader expected a slightly higher number at $738-739/tonne. “I saw more deals between $735-742/tonne than at $725/tonne,” he said.

October will be the second month in a row to see a contractual fall in values, with many players bearish into the rest of the year.

“I expect benzene to stay long in the fourth quarter,” one trader said. “Crackers will change to heavier feeds, pushing out more pygas, and I do not see demand picking up either,” he added.

The September contract was agreed down $217/tonne to settle at $828/tonne or €576/tonne, based on the officially agreed exchange rate at the time.

At the time, sources said that imports had added to an already lenghtening market, which pushed spot prices down. Still, the majority of players agreed that September settled too high considering market fundamentals.

Only a few hours after the contract was agreed, a spot deal was done $58/tonne below the contract price, at $770/tonne.

Throughout the rest of September the majority of spot deals continued to be done well below the contract price. All players agreed this was mainly a result of excess supply.

“Spot is lower because there is more benzene around, that’s really all there is to it,” a trader said. This was echoed by another trader, who said that the European market was long, while the US and Asia saw similar dynamics.

“Europe is cracking heavy feeds, and there are some shutdowns on downstream phenol/acetone and styrene markets,” the source said.

Players said there was little prospect of relief, since the US continued to trade at arbitrage level with Europe, which realistically meant that export opportunities to that region were scarce, they said.

Moreover, the fact that the majority of hydro dealkylation (HDA) units were still running in Europe, despite toluene values almost being at parity with benzene, also kept spot levels low, sources said.

Meanwhile, the downstream styrene market was only gaining ground because of increased buying interest for prompt material. Players said that low water levels on the Rhine meant vessels were only loading at 50%, significantly shortening supply to some of the region.

On Wednesday morning, the spread between benzene and styrene was at more than $400/tonne, while a profitable spread was already around $200/tonne, sources agreed.

October benzene was talked at $715-725/tonne CIF (cost, insurance, freight) ARA (Amsterdam, Rotterdam, Antwerp), while styrene values for the same month were pegged at $1,100-1,130/tonne FOB (free on board) Rotterdam.

The October benzene contract price was expected to settle later on Wednesday.

($1 = €0.69)

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By: Madelon Ten Cate
+44 20 8652 3214



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