07 May 2012 00:00 [Source: ICB]
Asia's benzene market remained the weakest compared with toluene and mixed xylenes (MX) in 2011, and early 2012. Supply was ample in most of 2011 because of high operating rates at reformers and crackers.
An estimated 1m tonnes/year of capacity was added in China in 2011. In South Korea, S-Oil started up its new 290,000 tonne/year unit in Onsan, which further exacerbated the region's net oversupplied position.
But supply was tight in Japan from March 2011 because of the earthquake and tsunami, which resulted in a slew of outages and kept supply in northeast Asia more balanced. Supply again tightened in southeast Asia from December 2011 to March 2012 due to a prolonged turnaround in Indonesia and reduced supply from a Thai producer.
Demand from SM was mostly subdued in 2011, and continues to be weak in early 2012. SM is the largest user of benzene in Asia, accounting for about 50-60% of the region's supply.
Exports to the US remained steady in 2011, but slowed in quarter four. But, in 2012, exports to the US have resumed and Asia has been shipping an estimated 50,000-60,000 tonnes every month.
Prices rose in the first quarter of 2012, supported by firm crude futures, a strong US market and tight supply in parts of the region. In late April prices had slipped slightly to a range of $1,185-1,190/tonne (€903-906/tonne) FOB (free onboard) Korea because of weak market sentiment based on a slowdown in the Chinese economy and world macroeconomic conditions.
Benzene can be produced from pyrolysis gasoline (pygas) in the steam cracking of naphtha, gasoil or condensates to make olefins. Another source is the selective disproportionation of toluene (TDP) where benzene is coproduced in a paraxylene (PX)-rich xylenes stream. A third, albeit high-cost, route is the hydrodealkylation (HDA) of toluene, but benzene prices need to be high enough to stimulate production.
The existing oversupply in Asia will be maintained through 2012. US producer ExxonMobil was due to start up its new Singapore plant in the second half of 2011, but some players expect that start-up may be delayed to end 2012 or early 2013. The bulk of new production will continue to come from China where an estimated 900,000 tonnes/year of additional capacity could start in 2012.
In terms of downstream demand growth, a slowdown in the Chinese economy is already taking its toll on demand for end-use applications like solvents and other consumer goods.
But some players remain optimistic that overall demand will improve from the second half of the year.
Consumption into SM will see slower growth this year in China where only three SM plants with an estimated total capacity of 710,000 tonnes/year are due to start production. On the other hand, between 2012-2014, a significant increase in demand for benzene is expected to come from the phenol sector. In these years, the total phenol capacity growth is expected to be about 2.2m tonnes.
A significant amount of growth is also expected from caprolactam, where about seven plants with a total capacity of about 800,000 tonnes/year, are due to start up in 2012.
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