Europe November benzene CP poised for a reduction

30 October 2013 10:43  [Source: ICIS news]

LONDON (ICIS)--Players in the European benzene market are anticipating a decrease for the monthly contract settlement for November expected later in the week, sources said on Wednesday, in line with lower spot numbers and soft derivative offtake for the upcoming month.

Despite earlier expectations that cracker turnarounds in the fourth quarter could tighten feedstock availability and help boost European benzene pricing and sentiment, October has seen the spot market gradually weaken.

One supplier noted earlier this month that the market was already well prepared for the turnarounds, which has since tempered any potential bullishness.

With phenol offtake limited and styrene availability improved after some imports from the US, benzene was well supplied in Europe, and spot values have drifted down by up to $100/tonne over the course of October.

Bearish sentiment in the US this month, where prices dropped below $4.00/gal for the first time since June 2012, also helped dampen the mood in Europe over the course of the month.

European spot values for November reached a yearly low of $1,125/tonne (€821/tonne) CIF ARA last week, before the market galvanised in line with firmer US pricing midweek, moving back up towards the $1,200/tonne mark.

This was the lowest number in the European benzene market since March 2012, according to ICIS data.

November spot values were at $1,150-1,165/tonne CIF ARA, slightly down in line with some overnight losses in the US market. Deals for November delivery have been done this week within a range of $1,160-1,180/tonne.

The October monthly contract was agreed at a US dollar concept of $1,254/tonne FOB (free on board) NWE (northwest Europe).

Derivative demand has been weak this month among phenol and styrenics players. However, one trader believed that the bottom of the market has now been reached.

“Europe is a supply-driven market, so when availability starts to get restricted again we will see the prices move back up,” the trader explained. “There are players holding on to higher priced material, waiting for a recovery.”

With the spread of benzene over naphtha also plummeting down to around $200/tonne last week, this also signalled for many the absolute floor for European pricing, given the fundamental supply/demand tightness, both domestic and global.

Looking ahead into 2014, market players remain focused on the impact of ethane cracking over naphtha and the potential impact this will have on feedstock availability for the benzene market. Sources expect that the spread of benzene over naphtha will remain historically high around the $300/tonne mark as a baseline.

“There is usually some rallying in the spot market ahead of the contract settlement,” one source added. “The upturn on oil earlier in the week also helped, but downstream is still very soft.”

($1 = €0.73)

By: Truong Mellor
+44 208 652 3214

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