Asia benzene to stay firm on tight supply of prompt cargoes

21 September 2012 11:05  [Source: ICB]

Asia's benzene prices have gained by 6.8% since the start of the month and look set to remain firm on limited supply of prompt cargoes, and strong values of upstream crude and naphtha, according to industry sources.

On 13 September spot benzene prices were assessed at $1,245-1,255/tonne (€971-979/tonne) FOB (free on board) Korea, up by an average of $80/tonne from $1,170 FOB Korea in end-August, according to ICIS.

"It is likely that prices would remain firm, especially since SK Energy is having a turnaround in October. Supply would continue to be tight, maybe until November," said a northeast Asia-based producer.

South Korean SK Energy is planning to shut its Ulsan-based reformers early next month for 30-45 days of turnaround. The reformers have an estimated total benzene capacity of 470,000 tonnes/year.

In Japan, JX Nippon Oil's two reformers in Mizushima that produce 120,000 tonnes/year of benzene have been down since July, along with the company's refinery. Some liquefied petroleum gas (LPG) tanks at the company's Mizushima B refinery failed to meet the Japanese government's safety standards and had to be shut.

In Europe and the US, problems in domestic production may also lead to stronger demand for Asian benzene, further tightening supply in this region.

A window for arbitrage trades to the US narrowly opened last week, market sources said. Asian benzene prices may spike if more cargoes are moved to the West as regional supply is drying up.

For September, some 69,000-70,000 tonnes of benzene from South Korea were exported to the US. But the volume of shipments is expected to fall to around 50,000-60,000 tonnes in October, according to market participants.

LIMITED INVENTORIES

Northeast Asian benzene producers have either very little inventory left or are sold-out on cargoes for September and October, market sources said. Southeast Asian producers, on the other hand, do not have surplus to sell to the spot market, and are just producing enough to fulfil term contracts, they said.

The shortage of prompt benzene cargoes, occurring as crude and naphtha prices are rising, has heightened speculative trades, driving up benzene prices in spite of weak demand.

On 13 September, US crude was trading at above $97/bbl, while Brent crude was at more than $116/bbl, while naphtha prices stood at $1,012-1,015/tonne.

Benzene demand from major downstream sectors - styrene monomer (SM) and phenol - remains soft, with regional facilities currently operating at an average reduced rate of 70-80%, according to market players.

A northeast Asian-based SM producer blaming high benzene prices for squeezed margins is more inclined to cut output than to risk losses by buying benzene.


By: Jasmine Khoo
+65 6780 4359



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