FocusEurope benzene volatile in unpredictable market

16 October 2009 15:09  [Source: ICIS news]

By Madelon Ten Cate

LONDON (ICIS news)--European benzene values remained volatile this week as production issues combined with trade taking short positions left the market unpredictable, sources said on Friday.

“October was a dangerous month,” a trader said, adding that it was a bit like 'musical chairs': “Nobody wants to be left behind, the risk is that all of a sudden everybody is done and you end up without a seat.”

Dow Chemical had earlier reported technical problems at its benzene unit in Terneuzen, the Netherlands, and was expected to shut down for repairs from mid-October until approximately early November.

This meant the producer was left with a shortage of benzene, and with several traders reported to have taken short positions in a backwardated market, spot prices originally spiked by almost $200/tonne in the week ending 9 October.

Over the past week, however, the market turned more volatile, and moves of more than $50/tonne (€34/tonne) within 24 hours were recorded. “Dow seems to have bought what they need, and trade is now covered,” another trader explained.

Players found it difficult to predict any short term movements on the market, however. One consumer said that it was still possible for some traders to be short, and added that if they started to show themselves, the market could see more price hikes.

Another source said that the balance of the market also depended on the success of Dow’s restart expected in early November. “If Dow’s start up goes according to plan, then the market will see more volume and the upward pressure on prices will be gone.”

The source added, however, that European stock levels were still low, which meant further increases were possible if Dow was out of the market for longer than anticipated.

Spot prices also depended on upstream crude developments, which reached a one-year high on Friday at $76.77/bbl as investors concentrated on the equities markets for guidance, sources said.

Other regions were now behaving independently of European prices, it seemed, and both Asian and US benzene values were reported stable for most of the week, which players said made it difficult to assess whether an arbitrage window was really open.

On Friday afternoon, Asian values were assessed at $780-790/tonne FOB (free on board) Korea for December, and US prices at $2.71-2.80/gallon ($816-843/tonne) FOB US Gulf by global chemical market intelligence service ICIS pricing.

At the same time, European values were pegged at $870-890/tonne CIF (cost, insurance, freight) ARA (Amsterdam, Rotterdam, Antwerp) for November, which meant it was risky to ship business between regions.

One trader was still reported to ship some parcels from the US to Europe, though, but volume and arrival date were unclear.

“We just have to go with the flow,” the source said. “At this point in time, nobody really knows anything.”

($1 = €0.67)

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By: Madelon Ten Cate
+44 20 8652 3214



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