News focus: Tight supply and feestock switch to support Asia benzene prices

01 March 2013 09:05  [Source: ICB]

Spot benzene prices in Asia will likely be supported by tight supply stemming from heavy turnaround schedule at regional aromatics facilities from March to May, industry sources said.

Lower aromatics production is also being yielded from increased use of liquefied petroleum gas (LPG) - an alternative to expensive naphtha - as feedstock for petrochemical production, further squeezing supply in the region, they said.

On 25 February, spot benzene prices were at $1,380-1,395/tonne (€1,049-1,060/tonne) FOB (free on board) Korea for May cargoes.

Spot benzene prices on FOB Korea prices were generally on a downtrend since hitting a three-week high of $1,440/tonne on 21 January, as trading typically goes on a lull in the weeks leading to the Lunar New Year holiday, which fell on 9-15 February this year. Subdued demand from the key US market further weighed on the Asian benzene market.

DOZEN TURNAROUNDS

In the next three months, a dozen aromatics plants in Asia are due for annual turnarounds, with three major South Korean producers - Lotte Chemical, LG Chem and Yeochun NCC (YNCC) - planning to shut some of their aromatics facilities for up to three weeks in April for catalyst change, industry sources said.

Asia Benzene"Although these turnarounds are planned, loss of production will still affect the spot availability and this will fuel prices," a South Korean trader said.

Production loss is estimated at about 300,000 tonnes based on the scheduled turnarounds in March to May, market players said. "Given the large capacity loss, supply will be tight starting from March. Benzene prices will firm," a South Korean producer said. In South Korea, which is the largest exporter of benzene in Asia, some production loss will also be incurred from the partial or full feedstock switch from naphtha to LPG at four aromatics producers.

Other producers in Asia are building up inventory to cater to their customers' needs during the turnaround period, industry sources said.

Benzene prices have no reason to soften heading into March, market players said.

"Besides the tight supply, demand is expected to pick up," a second South Korean trader said.

Scheduled turnarounds at a few downstream styrene monomer (SM) plants in Asia are due to end by March and April, auguring well for benzene demand, industry players said.

STRONG US, EU DEMAND

Outside Asia, benzene consumption in the US is also likely to increase because of strong demand for SM, they said.

The price outlook is also upbeat in Europe because of tight supply thanks to refinery shutdowns and a deliberate reduction in benzene output ahead of scheduled turnarounds at downstream SM units in the region, market sources said.

"If crude does not see signs of weakness, and based on the strong likelihood that the overseas markets' conditions will improve, Asia's market sentiment will be lifted," a Singapore-based trader said.

In the key China market, however, high stock levels at eastern ports at more than 30,000 tonnes - nearly double before the Lunar New Year holidays - are curtailing demand for spot benzene imports, industry players said. "I am all covered, up until April even," a China-based end-user said.

Meanwhile, benzene trades into China and Taiwan are also being hampered by a wide gap in price quotes by buyers and sellers, and by rising freight cost, market players said. "Offers are too high for us to accept," a Taiwanese end-user said.

Offers for March or early April shipment into Taiwan were at a premium of $35/tonne over FOB Korea prices, while buying ideas were capped at a premium of $30/tonne, players added.


By: Ong Sheau Ling
+65 6780 4359



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