FocusAsia benzene to see Q4 weakness on bearish SM market

20 September 2011 06:56  [Source: ICIS news]

By Mahua Chakravarty

SHANGHAI (ICIS)--Asia’s benzene market may turn weak in the fourth quarter as regional demand from the styrene monomer (SM) sector, as well as US' imports of the aromatics product, traditionally slackens towards the end of the year, industry sources said on Tuesday.

SM production is the largest downstream for benzene, using up an estimated 50-55% of Asia's output of the material.

Spot benzene prices in Asia were hovering at about $1,070-1,085/tonne (€781-792/tonne) FOB (free on board) Korea on Tuesday morning, according to ICIS.

At present, regional demand for benzene from the SM sector is steady, as SM producers currently generate robust margins, market sources said.

But the onset of the winter season from November in northeastern Asia usually leads to a slowing of demand for SM and, consequently, for benzene.

Because of the freezing weather, there is less activity in the construction industry, which is a major end-user of SM.

“Construction demand will likely slow down in this region, [while] ABS [acrylonitrile-butadiene-styrene plants’] operating rates are not high at present,” said a Japanese producer.

The expected weakness in demand will likely bloat supply of benzene in northeast Asia in the last three months of 2011, reversing the current tight availability of the material, industry sources said.

Supply in northeast Asia is limited for September and October amid a slew of scheduled shutdowns, as well as outages, at aromatics facilities in South Korea, Japan, China and Taiwan.

Meanwhile, demand from the US, a major importer of Asian benzene, also typically declines towards the end of the year and will likely leave the region awash with supply.

Market sentiment is also weak in the US benzene market on concerns that the world’s biggest economy is heading towards another recession, traders said.

Asia is a net exporter of benzene to the US, which receives an estimated monthly supply of 40,000-50,000 tonnes of the material from the region on spot and term basis.

($1 = €0.73)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Mahua Chakravarty
+65 6780 4359

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