FocusNE Asia hydrodealkylation producers mull shutdown on poor margins

15 July 2011 07:39  [Source: ICIS news]

By Mahua Chakravarty

Benzene is used to produce a number of petrochemical intermediates such as ethylbenzene for styrene production, including polystyreneSINGAPORE (ICIS)--The supply of benzene may tighten in the near term as several hydrodealkylation (HDA) producers in northeast Asia have trimmed production or are considering shutting down units, said traders and producers on Friday.

Several producers in Japan and South Korea have shut, or are planning to shut, their HDA units as margins are in the negative territory, they added.

As a result, benzene supply in northeast Asia is tighter compared with June and could remain limited in the near term, said traders.

Production margins have been squeezed severely in the past few weeks as feedstock toluene values are almost on a par with benzene.

Spot toluene prices have risen by as much as $90/tonne (€64/tonne) since 1 July and were at $1,130-1,145/tonne FOB (free on board) Korea on Friday morning, according to ICIS pricing.

Toluene prices have spiked in the past two weeks as a result of sudden demand from regional buyers and an upsurge in WTI crude futures, said traders.

Benzene values have jumped up by $95/tonne since 1 July to $1,145-1,155/tonne FOB Korea on Friday.

However, the benzene price increase is not adequate to cover HDA production margins, said traders. A spread of about $100/tonne between benzene and toluene is needed as the break-even point.

Hence, Japanese producers such as Maruzen Petrochemical and Taiyo Oil have trimmed their HDA operating rates to the minimum of 40%, said sources with both companies on Friday.

Taiyo Oil has been operating its Shikoku-based unit, which produces 450,000 tonnes/year of benzene, at the minimal level since the middle of May because of poor margins and demand for feedstock toluene for gasoline blending, the source added.

The company is not planning to shut the unit in the near term, although production margins are negative, he said.

Maruzen Petrochemical, on the other hand, is mulling shutting its 130,000 tonne/year benzene unit at Chiba, after reducing operations to 40% since the end of June, the company source said.

In Japan, other producers such as JX Nippon Oil & Energy are also considering trimming production at their toluene disproportionation (TDP) units, said traders.

JX Nippon could not be reached for comment.

Meanwhile, a South Korean producer is maintaining the shutdown of its HDA unit because of the thin margins, said an industry source. No confirmation or details were available.

Benzene is the largest volume aromatic petrochemical. It is used to produce a number of petrochemical intermediates such as ethylbenzene for styrene production, cumene for phenol and acetone, cyclohexane and nitrobenzene.

Toluene is used in solvent applications. It is also used to make toluene di-isocyanate (TDI) which is used in the manufacture of polyurethane (PU) foams. A major use of toluene is to make benzene and xylenes using a number of technologies.

($1 = €0.71)

For more pricing intelligence, visit ICIS pricing
For more on benzene and toluene, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Mahua Chakravarty
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