FocusAsian benzene and toluene to soften as holidays/shutdowns loom

22 January 2010 06:06  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS news)--Asia’s benzene and toluene demand is expected to slow down with the start of the downstream styrene monomer (SM) turnaround season and also due to upcoming Lunar New Year holidays in February, market sources said on Friday.

At present, demand for benzene from the SM sector is healthy, but this is not likely to last going into February when a slew of shutdowns at a number of SM units in Taiwan, Japan and South Korea are expected (see table below), benzene traders and producers said.

“There are some shutdowns of SM plants from next month, [so] we expect the benzene market to soften,” said a Japanese supplier of benzene. SM is the largest downstream, with about 50% of Asia’s benzene used for SM production.

In addition, benzene supply in Asia was high at present as majority of crackers, toluene disproportionation (TDP) and hydro-dealkylation (HDA) units were running at full steam on the back of strong margins, said producers and traders.

Due to such bearish expectations, a number of key benzene sellers in Asia were trying to ship volumes to the US where the prompt month’s supply was reported to be tight. An estimated 20,000-30,000 tonnes were leaving Asian shores in January, while another 40,000-50,000 tonnes were expected to head westward in February, traders and producers said.

A similar slowdown in demand was expected in the Asian toluene market as China, the largest consumer in this region, had started winding down for the upcoming break in February, regional traders and producers said.

China is known to cut back imports ahead of the Lunar New Year holidays every year as factories lower operations or close, and migrant workers head back to their hometown.

“Some factories have already started reducing production for the holidays,” an east China-based trader said.

Inventory levels in east China were also very high at about 100,000 tonnes which was further exerting pressure on import demand, local and regional traders added.

However, medium term expectations for both benzene and toluene from March-May were more upbeat. Prices of both products were likely to rise from March when demand for aromatics imports in the US was expected to improve. At that time, US refiners are known to prepare for the summer driving season from May, when gasoline demand spikes.

The onset of summer in some Asian countries was also expected to improve gasoline demand, which in turn would improve toluene demand, said traders and producers.

Toluene is used as a blendstock in gasoline production in the US and in some Asian countries.

This optimism in a price recovery was not shared by all, with some players expecting the US-led recovery in benzene prices to be weaker than previous years due to heavy Asian exports to the US and general weaker demand these days.

“Demand for products from the US is bearish [these days], so we cannot expect a sudden gasoline spike,” said a Japanese trader.

SM plants turnaround schedule

Additional reporting by Clive Ong

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By: Mahua Chakravarty
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