Europe chemical profile: benzene

12 October 2012 09:35  [Source: ICB]


EU BenzeneBenzene is used to produce several intermediates, including styrene, phenol, maleic anhydride (MA), alkylbenzenes and chlorobenzenes. It is also used to make anthraquinone and hydroquinone, benzene sulfonic acid and other products in drugs, dyes, insecticides and plastics.


The European benzene market has struggled with volatility since the start of 2010 that has largely been driven by supply issues. Volatile crude prices, low inventory targets and a continueing lack of confidence in the market were contributory factors.

The key supply issue appears to be reduced pyrolysis gasoline (pygas) availability for benzene production. Crackers increasingly utilising lighter feedstocks will keep pygas supply restricted and mean that European benzene will remain structurally balanced to tight.

Demand for benzene from the styrenics chain since 2010 has been strong, with emerging sectors such as expandable polystyrene (EPS) proving to be a fertile market in Europe. Other more traditional markets such as polystyrene (PS) continue to struggle to compete with the scale of producers in the Middle East and Europe.

Phenolic demand was particularly strong in early 2011, driven by inventory restocking, and remains steady this year, although weak economic data from the US and China, as well as global concerns about the eurozone debt crisis have contributed to some apprehension among buyers to build stocks in a volatile climate.


Pricing in Europe was tense throughout the first half of 2010, driven by supply issues, volatile energy costs and even exchange rate fluctuations. A lack of imports into Europe and traders shipping material abroad to capitalise on arbitrage opportunities saw availability dry up towards the end of the year, with spot prices moving back above $1,000/tonne CIF ARA.

This bull run continued in early 2011, spurred by unplanned outages and a closure on the River Rhine. Spot pricing reached $1,400/tonne before the arrival of imports by April saw the market cool, and the downward correction continued into the year on lower crude prices and better availability via imports.

By the end of the year, the benzene market had fallen back below $1,000/tonne amid macroeconomic weakness, which was reflected in poor demand from both the styrene and phenol chains.

The new year saw some restocking, and limited feedstock availability as well as strong oil costs helped push prices back up in early 2012. Imports were also diverted owing to a bearish outlook, and the European market quickly tightened.

Prices were resilient as the year progressed, even as crude futures softened, as healthy demand and tight supply buoyed the market.


EU BenzeneIn Europe, the main source of benzene is from pyrolysis gasoline (pygas) co-produced by steam cracking naphtha, gasoil or condensates to make olefins. Another source is the selective disproportionation of toluene (TDP) where benzene is co-produced in a paraxylene (PX)-rich xylenes stream. The gasoline pool is also an increasing source as stricter regulations limit the content of benzene/aromatics in gasoline.

A third high-cost route is the hydrodealkylation (HDA) of toluene, but benzene prices need to be high enough to stimulate production. Benzene is also co-produced in the Cyclar process developed by UK producer BP and US technology firm UOP, which converts butanes and propanes into aromatics.


While the closure of Switzerland-headquartered producer INEOS's polystyrene (PS) units in Marl, Germany in October 2012 could help redress the balance by easing some domestic demand for benzene, many in the market are sceptical of this as a solution to the current problem of tight supply, as PS output has already been running at reduced rates for some time amid weakening demand.

By: Truong Mellor
+44 208 652 3214

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