FocusAsia benzene to continue tracking weak Europe, US markets

10 January 2013 06:20  [Source: ICIS news]

By Ong Sheau Ling

Asia benzene to continue tracking weak Europe, US marketsSINGAPORE (ICIS)--Benzene prices in Asia may continue falling in the short-term, dragged down by weakness in the US and European markets for the aromatics product, industry sources said on Thursday.

Spot prices in Asia were down for the fourth consecutive trading session, shedding a total of $105/tonne (€80/tonne) as of Thursday noon, according to ICIS. Benzene was at $1,375-1,385/tonne FOB (free on board) Korea, down by $10/tonne from Wednesday’s close.

Asian prices have been largely tracking the weakness in the key US market, where benzene prices were on their fifth straight day of decline.

Some of the market players in the region are taking the opportunity to offload cargoes to lock in profits, traders said.

On 9 January, US benzene for prompt shipment closed at $4.64-4.75/gal FOB US Gulf, with the total loss over a five-day period at $0.46/gal or 9%.

“Prices were previously escalating in the last quarter, hitting a fresh all-time high every day in end-December. It is time for prices to correct,” a southeast Asian aromatics producer said.

Spot prices in Asia hit a record high of close to $1,500/tonne FOB Korea on 28 December, according to ICIS.

“With price uncertainty seen in the US, [the market] sentiment here [in Asia] is not doing any better,” a Singapore-based aromatics trader said.

A recent softening in the key downstream styrene monomer (SM) market is adding to the pressure on benzene, market sources said.

“We were hoping that benzene prices [will] get support from SM, but SM started to plunge as well,” another southeast Asian benzene producer said.

Spot SM prices were at $1,730-1,750/tonne CFR (cost and freight) China on 9 January, down by $15/tonne from the previous day, after hitting an all-time high of $1,800/tonne CFR China on 4 January, according to ICIS.

The phenol market, which is another downstream of benzene, is also performing poorly.

Asian phenol makers have cut production in view of the rising cost of benzene in the fourth quarter of last year, to stem their losses, market players said.

In China, domestic benzene prices are also on the retreat, falling by yuan (CNY) 100/tonne ($16/tonne) from a week ago to CNY10,700/tonne ex-tank in the south and to CNY10,800/tonne ex-tank in the east, market players said.

“Now domestic prices in China are higher than the international market [prices] for prompt cargoes. But buyers are not ready to buy,” a China-based benzene buyer said.

Declining prices across the globe kept buyers on the sidelines, quoting much lower bids against current offers, traders said.

CFR China cargoes are offered at premiums of $35-40/tonne to FOB Korea shipments, against bids capped at $30/tonne, they said.

“We can’t see the premium below $30/tonne. Buyers are aware that market will fundamentally turn tight,” a South Korean aromatics producer said.

Expectations of a demand pick-up will eventually lend support to benzene prices, market players said.

“We are not looking at prices crashing,” another China-based benzene buyer said.

Spot benzene availability will decrease this year, given heavy expansions in the downstream phenol and methylene di-p-phenylene isocyanates (MDI) capacity.

Market players expect Asia’s tight benzene supply to firmly support prices this year, but in the meantime, the downtrend will continue as the pull from other markets is too strong.

“It all depends on how long Europe and US [benzene prices] will continue to fall,” a South Korean trader said.

($1 = €0.77 / $1 = CNY6.23)

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

Author: Ong Sheau Ling

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