NPRA '10: US aromatics soar as industry lands in San Antonio

28 March 2010 20:35  [Source: ICIS news]

By Landon Feller

HOUSTON (ICIS news)--US aromatic prices have remained high amid upstream feedstock changes and reduced operating rates - as the chemical industry converges on the annual International Petrochemical Conference (IPC), held by the National Petrochemical & Refiners Association (NPRA).

Benzene spot prices in the high $3.40s/gal FOB (free on board) US Gulf (USG) for April soared above year-earlier levels around $1.70/gal, driven on the back of gains in Europe, sellers and traders said.

US spot toluene was mostly stable around $2.75/gal FOB despite slow off-take in the gasoline sector. This was compared with April 2009 when toluene was trading around $2.00/gal same terms.

Low refinery rates, which have scarcely climbed above 81% in recent months, have cut benzene production and sent prices higher despite lacklustre demand.

“Refineries continue to be under-run,” said a US-based consultant.

US aromatics supply has been further hindered by the recent conversion of many flexible crackers from naphtha to lighter feedstocks, which produce less pyrolysis gasoline (pygas).

A cracker that processes ethane produces 1/12 the pygas and 1/7 the benzene that a full-spectrum naphtha-fed unit will make.

In 2009, US refinery output of molecules heavier than butylene fell by 29%, or 900,000 tonnes, owing primarily to sluggish demand and the switch to lighter feedstocks, market players said.

“Benzene is a counter-intuitive product,” said another market watcher. “Pygas and reformate supplies dictate benzene price direction on a two- or three-month lag, regardless of demand.”

Globally, the benzene supply picture has been balanced by new capacity coming on line in the Middle East and Asia, sources said, but the US market faces less domestic production and even greater demand for imports in the coming years.

Toluene conversion economics have been shaky as well, with hydrodealkylation (HDA) viable in only three of the past 18 months, a consultant said. Low toluene alternate values mean less conversion to benzene and xylene.

Gasoline demand is expected to rise in April and May, helping to further extend supplies of toluene and xylenes as blenders work down overhanging winter gasoline inventories.

Higher prices and growing supplies may seem incompatible, but a credit crunch in Asia is drawing little material from the USG, allowing little arbitrage even amid relatively high prices.

So market participants head to the International Petrochemical Conference with broad expectations for rising aromatics values in April.

"Benzene contracts will be up by a nickel in April,” said a xylenes producer, because “US [buyers and sellers] will all be in San Antonio, whipping each other into a frenzy.”

Hosted by the NPRA, IPC runs Sunday, 28 March through Tuesday, 30 March.

For more on benzene and toluene visit ICIS chemical intelligence
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By: Landon Feller
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