OUTLOOK '12: Asia benzene fundamentals seen as stable-to-firm

27 December 2011 04:46  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS)--Asia’s benzene fundamentals are expected to be stable-to-firm in 2012, with supply remaining high and downstream demand from phenol and caprolactam (capro) experiencing moderate growth, traders and producers said.

Benzene supply has been high for most of 2011 and this will continue next year as reformer operating rates are likely to be healthy, partly because co-products mixed xylene (MX) and paraxylene (PX) are in tight supply, they added.

Asia is expected to see limited capacity growth next year, with only ExxonMobil due to start up its 340,000 tonne/year benzene unit in Singapore, said traders.

However, this start-up may get delayed to the end of 2012, and so its impact on regional benzene balance is likely to be limited, two regional traders said.

In Japan, benzene supply is likely to tighten as compared with this year. Asahi Kasei is planning to permanently idle its 300,000 tonnes/year benzene unit in Mizushima from March and is expected to purchase more benzene for its downstream styrene monomer (SM) units, said a key Japanese trader and a producer.

JX Nippon Oil & Energy is planning to restart production at its 170,000 tonne/year benzene unit at Sendai at the end of March, said a company source. This unit was severely damaged in the devastating 11 March earthquake and tsunami, and has been shut since then.

On the demand side, growth in the downstream styrene monomer (SM) segment is expected to be limited, with only two new plants totalling 440,000 tonnes/year of SM likely to start production in China next year, said traders. This is compared with five projects with a total capacity of 490,000 tonnes/year that were started up this year.

SM is the largest benzene downstream market in Asia, with about 50-60% of total benzene output consumed for SM production.

The bulk of growth from downstream markets is expected to come from sectors like phenol and capro, traders said.

An estimated seven new capro plants are expected to come on stream in 2012, with the additional capacity totalling about 800,000 tonnes/year, said market participants.

For phenol, two plants with a total capacity of 337,500 tonnes/year are expected to be started up next year, market sources said, with more new capacities set to come on stream in 2013.

Demand for benzene from the key US market is also likely to see resurgence from the first quarter of 2012, traders said. US benzene values are expected to rise following limited exports from Asia in the fourth quarter of 2011, they added.

“We are expecting some recovery in Q1 next year as stocks are low and US prices are moving up,” said a Japanese trader.

US benzene prices have been hovering below Asia’s for nearly the whole last quarter of 2011 on weak demand and a year-end drawdown of stocks as market players want to avoid inventory taxes.

Spot price trends are difficult to predict as they are largely dependent on WTI crude values and naphtha futures, said traders and producers.

“I expect the benzene and naphtha spread to widen to $150-200/tonne [€116-154/tonne] in 2012, but the macroeconomic situation remains uncertain due to the debt crisis in Europe, and economic problems in the US and China,” said a key regional producer.

The spread between benzene and naphtha needs to be at least $140-150/tonne for manufacturers to maintain production margins.

($1 = €0.77)

For more on benzene, visit ICIS chemical intelligence
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By: Mahua Chakravarty
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