Europe Feb benzene CP to firm on bullish spot levels - sources

28 January 2011 12:37  [Source: ICIS news]

LONDON (ICIS)--The European benzene market was poised for another significant increase in the monthly contract settlement for February as cracker shutdowns, good demand and the continued strength of crude prices saw spot levels touch $1,400/tonne (€1,022/tonne) CIF (cost, insurance, freight) ARA (Amsterdam, Rotterdam, Antwerp) this week, sources said on Friday.

Following the late planned shutdown this week at Dow Chemical’s No 2 cracker at Terneuzen in the Netherlands, SABIC’s Olefins 4 cracker at Geleen was also brought off line because of unresolved technical problems.

Olefins 4, which has a nameplate capacity for ethylene of 660,000 tonnes/year according to ICIS data, is one of two crackers operated by SABIC at the site in the Netherlands.

Following deals at $1,262-1,270/tonne earlier this week, the news of the cracker shutdowns combined with unconfirmed talk of further disruption at other sites saw an increasingly bullish sentiment take hold.

By Thursday, February benzene was trading at $1,400/tonne. Availability constraints for prompt cargo also led to a significant premium emerging for early February cargo this week, with offers heard as high as $1,495/tonne. One major European seller said the market was currently “tighter than ever”.

While a dip in crude prices on Thursday afternoon brought February bids and offers down, several sources expected the market to reverse these losses ahead of the contract settlement.

The January benzene contract was agreed at $1,155/tonne FOB (free on board) NWE (northwest Europe) and converted to the euro price of €879/tonne at the officially agreed exchange rate of 1.3136.

In light of the surge in European values, Asian suppliers were currently scrambling to export material into the ARA region in order to capitalise on the arbitrage window. Asian prices were currently $245-250/tonne less than European prices, with freight rates valued at $80-90/tonne from South Korea to Europe.

Shipping industry sources cited about 20,000 tonnes of Asian benzene fixtures bound for Europe late last week.

Despite the buoyancy of the market for February, several players expressed doubts on how sustainable current prices were. One major European consumer said that producers had yet to give a convincing explanation for the current peak in prices.

The consumer added that the upward trend for February started before news of the cracker shutdowns, and that the current price levels were not truly reflective of the market.

($1 = €0.73)

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By: Truong Mellor
+44 208 652 3214

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