04 June 2010 11:26 [Source: ICIS news]
By Malini Hariharan
MUMBAI (ICIS news)--Asian aromatic markets have been complicated by a number of issues that are making it difficult for participants to figure out the outlook for the next quarter.
The problem is not only volatile crude prices but also demand, which is usually strong in the second and third quarters. This year, however, it is missing.
The net result is oversupplied benzene and toluene markets, which have depressed prices over the last few weeks.
Asian benzene prices dropped 18% in May and were at $810-820/tonne (€664-672/tonne) FOB (free on board)
“Benzene and toluene have been very volatile. This is usually a good season for BTX (benzene, toluene, xylenes), but we are in a situation that no one has seen before,” explains Leonard de Guzman of consultancy Dewitt & Co.
Asian producers had ramped up output at reformers and pyrolysis gasoline-based units in anticipation of strong demand in May. And now, despite the downward pressure on prices, producers are hesitating to trim operating rates, as they do not want to be caught with low stocks once gasoline demand kicks in.
“Though the market is long now, the volumes can be easily consumed when demand comes,” says de Guzman.
But when that will happen is still uncertain. The
The US Energy Information Administration's (EIA) Gasoline Summer Consumption and Supply report predicted an increase of just 0.9% in gasoline consumption this summer, but gasoline stocks were about 7m bbl, or 3%, higher than the start of the 2009 driving season.
This has left producers such as the Chinese refining and petrochemical major Sinopec struggling with a build-up in stocks.
De Guzman estimates that Sinopec is holding about 40,000 tonnes of benzene in inventory, nearly double the normal level, because of weak demand from the styrene sector.
“Sinopec initially planned to slash local prices in order to export benzene in June, but that was foiled by a fall in FOB
It is estimated that Chinese companies have sold about 30,000 tonnes at $760-800/tonne FOB
Europe can take more benzene and toluene, but vessel availability is an issue. Exporting to the US is not an option, as that market is oversupplied and has seen a sharp fall in prices.
De Guzman predicts that Asian benzene will be slow to recover as the global inventory situation still has to be resolved.
The key, he says, is operating rates at reformers – will they be cut, or will producers keep them running in expectation of the summer gasoline demand and also a recovery in styrene demand?
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