FocusAsia benzene poised to soften on more supply, less demand

25 January 2013 06:27  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS)--Spot benzene prices are Asia is likely to stay soft, as a result of increased supply and weaker demand from the downstream sectors, market players said on Friday.

Several ongoing scheduled shutdowns at the key downstream styrene monomer (SM) facilities across Asia have curtailed demand for benzene and consequently, regional sellers have to seek more material to head to the US – Asia’s largest benzene consumer, they added.

“[Benzene] is in surplus in the Asian side,” a major South Korean aromatics producer said.

The US market opened this week with a soft note, declining for three successive sessions of $0.08/gal or 1.6% before grounding to a halt on Thursday at $4.88-4.92/gal (€3.66-3.69/gal) FOB (free on board) US Gulf, according to ICIS.

Asian sellers said they faced some resistance from their US buyers, delaying February loading, in view of possible downside in prices.

“US has to buy, just that they are waiting for Asia prices to fall further,” a South Korean trader said.

On 25 January mid-day, spot benzene prices were discussed at $1,390-1,405/tonne FOB Korea for February loading, shedding $42.50/tonne or 3% from Monday’s close, ICIS data showed.

Apart from declining prices, market activity also decelerated, traders and brokers said.

“[From Asia to the US], February [loadings] is slower as compared to January,” a Singapore-based shipping broker said.

“It also depends on the vessel availability,” a Singapore-based trader said, adding that Asian supply condition may remain surplus until Asian cargoes resume heading to the US in a regular manner.

Besides the numerous turnarounds at SM plants, its downstream expandable polystyrene (EPS) and unsaturated polyester resins (UPR) sectors will be due to shut from mid-February during the Lunar New Year for at least one week to even a month, traders said.

China will be closed on 9-15 February on account of the Lunar New Year holiday.

“It is the traditional lull season for SM in China, with that benzene demand will be hit,” a Singapore-based trader said.

Although margins of SM producers are healthy, absence of demand down the chain does not justify the SM makers to stock-up benzene, traders said.

On 24 January’s close, spot SM deals were reported at $1,725-1,730/tonne CFR (cost and freight) China for March parcels, according to ICIS.

In other benzene downstream markets such as phenol, margins remained squeezed. The current spread between benzene and phenol will need to rise three times to reach a breakeven level, market players said.

“Benzene producers’ margins have been fantastic. They have the room to reduce offers,” a northeast Asian SM maker said.

The benzene-naphtha spread on 25 January mid-day was at $402/tonne, more than double the breakeven level for Asian integrated aromatics makers, industry players said.

“The market does look a little soft now,” another Singapore-based trader said, adding that from March to June, market will paint a rosy picture with a slew of scheduled maintenance at the BTX (benzene, toluene, xylenes) units in Asia (see table below) .

“It is just the breathing period now. The low prices will be short-lived,” another South Korean trader said.

Shutdown schedule of BTX units in first half of 2013

Company	Location	Benzene	Toluene	Mixed Xylenes (MX)	Paraxylene (PX)	Turnaround period
Hyundai Cosmo Petrochemical (HCP)	Daesan, South Korea	120			380	1 month from mid- April
GS Caltex	Yeosu, South Korea	200		800	400	1 month from mid-March
S-Oil	Onsan(new), South Korea	300			900	1 month in April
SKGC	Ulsan, South Korea	550	1000	1520	350	40 days from May
					450
Fuji Oil	Chita, Japan	175		210		45-50 days from April
JX Energy	Marifu, Japan	100		200		Q2 (reformer)
	Mizushima, Japan	240	140	480	350
			60		230
	Muroran, Japan	120		400
Formosa (FCFC)	Mai Liao 1, Taiwan	130		100	270	45 days from May
PCS	Jurong No 1, Singapore	100	50	28		early June to mid-July
Aromatics Thailand (PTT)	Map Ta Phut No 1, Thailand	460				1 month in April (reformer)
Reliance Industries Ltd (RIL)	Jamnagar, India	520			1700-1800	April to May (PX)

 ($1 = €0.75)

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

Author: Ong Sheau Ling

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