FocusAsia benzene may firm up in near term on tight supply

16 July 2012 08:20  [Source: ICIS news]

China benzene may stay high throughout March on tight supplySINGAPORE (ICIS)--Asian benzene prices may continue rising in the near term to track the buoyant US and European markets, supported by tight supply of prompt cargoes globally, market sources said on Monday.

At midday, spot prices in Asia were hovering at $1,185-1,195/tonne (€972-980/tonne) FOB (free on board) Korea, $5/tonne higher than last Friday’s closing levels and up $130-135/tonne from 1 June, according to ICIS.

“Prices are likely to firm for the time being [as] all regions look very tight,” a Singapore-based trader said.

Asia is a key exporter of benzene to the US and European markets.

The US is the world’s largest benzene-importing nation, with an estimated monthly import demand of about 100,000 tonnes, said traders.

Strong crude prices have been supporting the gains in the global benzene market, with US spot prices of the aromatics product at 1,563-1,608/tonne FOB (free on board) Barges on 13 July, up by $393-421/tonne from 1 June, according to ICIS.

Prompt supply in the US market is tight due to production issues and reduced output from toluene disproportionation (TDP) units and from units that use the Mobil toluene-to-paraxylene (MTPX) technology, according to some traders.

The same situation is persisting in the European benzene market, driving up spot prices, they said.

Asian suppliers are scrambling to get hold of more spot cargoes to export to the US market, where benzene currently commands prices that are $378-413/tonne higher, traders said.

“Everyone wants to ship to the US…but vessel space is also tight,” a Korean trader said.

Freight rates for loading 6,000-9,000 tonnes of benzene from South Korea to the US are currently in the mid-$50/tonne levels, market sources said.

Asia is expected to ship at least 60,000 tonnes of benzene to the US in combined spot and contractual supply this month, according to traders.

These estimated volumes may go up further if traders can get hold of more vessels, said the Korean trader.

But Asia is likewise in tight supply for July- and August-loading cargoes, adding upward pressure on prompt prices within the region, and ensuring a wide backwardation with forward month prices.

The inter-month spread for August and September loading cargoes were assessed at a $35/tonne backwardation on 13 July.

Benzene production from a number of Asian crackers has been reduced in recent weeks due to poor margins, while increasing use of lighter feedstocks like liquefied petroleum gas (LPG) at crackers also leads to lower aromatics output, traders said.

In South Korea, production at some TDP units was cut in recent weeks because of squeezed margins, while in Japan, production hiccups are limiting benzene supply, they said.

Late last week, JX Nippon Oil was forced to shut production at its Mizushima-based refinery for safety checks, which may result in less supply of benzene from Japan for the US market, traders said.

The current uptrend in the Asian benzene market, however, does not reflect the weakness in downstream styrene monomer (SM) and phenol sectors.

“It is mostly short covering by traders which is driving up the [benzene] prices over here, in USG (US Gulf) and even in Europe,” said another Singapore-based trader.

($1 = €0.82)

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

By: Mahua Chakravarty
+65 6780 4359

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