FocusChina’s benzene prices to drop on weak demand

12 June 2012 05:10  [Source: ICIS news]

Benzene is used to produce a number of petrochemical intermediates such as ethylbenzene for styrene production, including polystyreneSINGAPORE (ICIS)--China’s benzene prices are likely to continue falling in June because of weak demand and bearish sentiment, but the decline may be limited by tightened supply following recent plant shutdowns, industry sources said on Tuesday.

Prices were assessed at yuan (CNY) 7,650-7,700/tonne ($1,203-1,211/tonne) ex-tank east China on 12 June, down by CNY450-500/tonne compared with CNY8,100-8,200/tonne on 30 May, according to Chemease, an ICIS service in China.

“European and US benzene prices fell in early June, on the back of declining crude oil prices. Although an arbitrage window between the US and Asia opened, the persistent decline in oil prices weakened the sentiment of Asian market players,” said a trader based in east China.

Major producers Sinopec and PetroChina cut their offers by CNY400/tonne on 5 June, in view of the falling prices in other regional benzene markets, the trader added.

Offers were heard at CNY7,800/tonne EXW (ex-works) in south, east and north China and at CNY7,700-7,850/tonne EXW in central China on 11 June, a company source at Sinopec said.

“Although benzene suppliers have cut their offers, buyers are still waiting for lower prices because of their pessimistic outlook,” another trader said.

Declining oil prices and the slowing economic global growth will also continue to weigh down on the demand for benzene as end-user demand remains weak, industry sources said.

The Chinese government earmarked CNY26.5bn to subsidise the consumption of energy efficient household electrical appliances for a one-year period starting from 1 June, according to Chinese state-owned news agency Xinhua.

This may provide support to some industries, but it will require some time for it to boost the demand for benzene, the sources said.

Meanwhile, the Chinese government’s continued property cooling measures will restrict demand from the downstream sectors, they added.

However, tightened domestic spot supply as a result of recent plant shutdowns might limit the decline in benzene prices, traders said.

Additional reporting by Crystal Zhao

($1 = CNY6.36)

By: Cassie Zhang

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