17 May 2013 09:55 [Source: ICB]
Arbitrage window remains closed amid high US inventories and negligible difference in prices between regions
Asia benzene exports continued to fall in May, as the arbitrage window to the US remains firmly shut, market players said on 9 May.
"Only one South Korean and one Japanese producer is exporting to the US this month for their contracts. Others have the option to skip since the spread is not workable at all," one producer said.
The price spread between Asia and the US was barely positive in April to early May, they added, citing that a price gap of at least $50/tonne (€38/tonne) is needed to cover the freight cost of $60-65/tonne for a 15,000-tonne vessel, traders and producers said.
For 9 May's mid-day assessment, the prices of spot May and June cargoes were at $1,230-1,300/tonne FOB (free on board) Korea, while spot prompt cargoes booked in the US Gulf were at $4.38-4.42/gal FOB, showing a price gap of $20-60/tonne, according to ICIS.
South Korean exports to the US slumped by 58% month on month in May, while Japanese exports fell by 17% during the same time frame, industry players said. In April, close to 50,000 tonnes were exported to the US, they added.
"Tanks in the US are full. There is no demand to seek for spot cargoes outside," a regional trader said.
ANNUAL IMPORT NEED
Some players estimated about 350,000 tonnes of benzene were imported by the US from January to April this year. This amount is close to the country's annual import requirement.
"Hefty imports have arrived previously that caused the inventories in the US to stay high," another trader said.
"Producers [in Asia] have no choice but to avoid exports to the US given the negligible price spread [between Asia and the US]," a second producer said.
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