08 November 2012 21:15 [Source: ICIS news]
HOUSTON (ICIS)--US November cumene contracts are expected to surge on the back of higher feedstock costs, sources said on Thursday.
With feedstock benzene contracts at record highs, US November cumene contracts are projected to settle higher by 7-9 cents/lb ($154-198/tonne, €120-154/tonne).
Additionally, feedstock refinery-grade propylene (RGP) prices have rebounded, adding to the expected surge in November.
The US October cumene contract settled at 56-58 cents/lb FOB (free on board), as assessed by ICIS.
However, the November surge would keep US cumene contracts below the record high price of 75 cents/lb set in May 2011.
However, much of that record high was fuelled by RGP spot prices, rather than benzene contracts.
Because benzene contracts are driving cumene prices, downstream phenol demand is expected to soften.
As phenol is the key downstream market for cumene, this is expected to soften cumene demand and could push operating rates lower.
Although demand for acetone, the other key downstream product, is healthy, it cannot offset weakness in phenol demand.
There is some optimism by phenol producers and buyers, however, that the record-high benzene prices can be passed along to end users, thus keeping demand steady through November.
If that happens, cumene demand would likely hold firm, allowing margins to remain steady.
Major cumene producers include CITGO, Flint Hills Resources, Georgia Gulf, Marathon, Philadelphia Energy Solutions and Shell Chemical.
($1 = €0.78)
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