FocusBenzene east to west arbitrage opens on US market hopes

10 November 2009 09:35  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian sellers are planning to export spot benzene cargoes to the US expecting better margins early next year, market participants said on Tuesday.

About 36,000 tonnes of Asian benzene cargoes were reportedly ready to be shipped to the US in the second half of November, traders said. Other key regional producers and traders were also planning to export to the US.

“This export volume is more than expected. It seems that players have more confidence in the US market next year,” a trader said.

A key Korean producer said the current price difference between the US and Asian spot benzene numbers was not the primary reason for the opening of the arbitrage, rather the expectations that price gap would be greater at the time.

“The potentially larger spread upon the arrival of cargoes in the US next year has encouraged players to participate in this cargo movement,” he added.

Since a typical shipping time frame was six to eight weeks, cargoes delivered from Asia in November and December would reach the US in January and February next year.

Spot benzene prices in Asia were assessed at $830-840/tonne (€556-563/tonne) FOB Korea (free on board) on Monday, while prices in the US were assessed at $2.80-2.92/gal ($851.20-887.68/tonne) FOB US Gulf for November, according to global chemicals market intelligence service ICIS pricing.

“Naturally, these traders are facing some risks if the US market does not turn out to be lucrative in the first quarter of 2010,” a Singapore-based trader said.

Producers indicated that exporting benzene to the US could maintain the balance in Asia as demand from the derivative sectors was weak.

“Although the US market may not be very attractive, that is the only outlet left,” a South Korean trader said.

A key regional trader said despite operating rate cuts at several aromatics units across Asia, there was still slight surplus of benzene, particularly in South Korea. "So traders and producers have to export to attain the balance.”

($1 = €0.67)

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By: Ong Sheau Ling
+65 6780 4359

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