China to continue benzene, toluene imports for 3-4 years

19 April 2010 10:43  [Source: ICIS news]

MUMBAI (ICIS news)--China is expected to remain an importer of benzene and toluene for the next three-four years despite excess capacity in the domestic market, a market analyst said on Monday.

"China’s benzene capacity is about 7.46m tonnes/year as against demand of 4.5m tonnes in 2009. But the country imported about 620,000 tonnes and exported 280,000 tonnes," Summer Qiu, manager for aromatics and styrene at CBI, said.

The capacity figure excludes coal-based benzene plants.

CBI is a joint venture with Reed Business Information, which owns ICIS news and is part of the Reed Elsevier Group.

In the case of toluene, China’s total capacity was 6m tonnes/year while demand was only 4.23m tonnes last year, Qiu said.

However, China imported 790,000 tonnes and exported 8,090 tonnes of toluene in 2009.

Most aromatics producers operated their plants at about 60% of capacity last year, Qiu said.

"Producers reduce operating rates if prices are not attractive. And the priority for refinery-based producers is gasoline rather than aromatics," she said.

This trend was expected to continue in the future even as new capacities for benzene and toluene were brought on stream, she added.

The benzene market gets more complicated if China’s coal-based producers are included in the picture. Only some are fully integrated from coke to crude benzene and coking benzene/hydro-coking benzene.

Many of the plants are run by small non-integrated companies with erratic operating rates, Qiu said.

"The capacity for coking benzene is about 2.10m tonnes/year but production was only about 900,000 tonnes last year because margins were low. And the capacity of hydrocoking benzene is 2.12m tonnes while production was about 740,000 tonnes," she added.

An additional problem is the reliability of supplies of crude benzene, the raw material for coking benzene and hydro-coking benzene.

According to CBI estimates, 51% of crude benzene producers in China were small producers with a capacity of less than 10,000 tonnes/year.

Qiu said that China would remain a swing player in the benzene market, importing and exporting product depending on local market conditions.

Major producers tried to balance the domestic market by adjusting prices and volumes, she said.

"For instance, Sinopec tries to match the FOB (free on board) Korea benzene price though there may be periods when the domestic price is kept lower to deter imports," she added.

Major producers export product to keep the market balanced while traders or end-users import cargoes when local supplies tighten due to operating rate cuts or plant shutdowns, Qiu said.

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By: Malini Hariharan
+65 6780 4359

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