09 November 2012 11:34 [Source: ICB]
US benzene prices may break seasonal trends and remain high through the rest of the year, sources say.
Typically aromatics prices fall during the fourth quarter as producers and some consumers finalise their positions and start de-stocking inventories for end-of-year tax purposes.
However, with the recent record high settlement on the November benzene contract, some trade sources are now divided about how prices will play out for the remainder of the year and how that may impact downstream markets.
ALL TIME HIGH
The November benzene contract settled at an all-time high of $4.90/gal ($1,467/tonne, €1,130/tonne), up by 50 cents/gal from the previous month, with trade participants citing recent record highs in the spot market and strained inventories. The benzene contract is also expected to push up downstream styrene, cumene and phenol contracts.
Styrene contract participants are yet to finalise October settlements. However, after the jump in benzene, styrene producers have already announced November contract price rises of 6-7 cents/lb.
In the phenol-acetone market, sources say they expect the record-high benzene prices will lead to lower operating rates, as buyers look to avoid accruing inventory.
However, the drop in operating rates could be mitigated by stable demand, even at higher prices, sources said.
Benzene demand from the styrene market has been weaker than expected in the fourth quarter, with little activity.
Despite the short-term pressure on those downstream contracts, most downstream sources expect the market to gradually move lower for the remainder of the year.
But other market participants expect traders to keep benzene prices high for the remainder of the year because of continued tightness in supply.
"I think they are going to stay high," said one aromatics broker who expects traders will keep prices high because of limited availability.
Another benzene trader, based in the US, said the tight supply would make it difficult for producers looking to clear out tank space. "There is nothing to destock," the trader said. "Backwardated markets are brutal, and it's not rewarding to hold on to stock."
The trader added that although energy prices are weakening, this is not leading to more supply.
Benzene spot prices were well above the $5.00/gal mark in October, with a record high trade achieved at $5.35/gal FOB (free on board).
Since the record high trade at $5.35/gal in mid-October, spot prices have come down some to around $5.00/gal.
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