Europe benzene starts to pick up alongside US gains

13 November 2013 11:16  [Source: ICIS news]

LONDON (ICIS)--European benzene spot levels have started to edge up for November, sources said on Wednesday, the upturn supported by gains seen in the US market.

However, a firmer US market could limit any further upward movement in Europe, as players look to keep the arbitrage window open between the two regions.

After reaching a yearly low of $1,125/tonne (€833/tonne) in October, benzene spot prices in Europe have largely been rangebound around the mid $1,100s/tonne on a CIF ARA basis. Overall activity has been thin due to limited demand from derivative markets amid inventory destocking as the end of the year approaches.

By Friday November 8, however, spot values were starting to reverse direction. Offers for November material moved as high as $1,180/tonne in line with firmer US spot pricing.

The upward trend continued this week, with offers opening on Monday 11 November at $1,185/tonne. Buyers followed the market up as the week progressed: there was talk of a November deal done at $1,185/tonne by Tuesday, while offers tipped over the $1,200/tonne mark.

By midweek, November bids for spot cargo were at $1,190/tonne but were not met with any offers. December was slightly backwardated with bids at $1,185/tonne.

News that Dow will temporarily close its cracker at Tarragona in Spain from 1 December is also likely to keep benzene sellers bullish into the forward month amid potential restrictions on pyrolysis gasoline (pygas) supply, a key feedstock source of benzene.

“Slowly but surely the market is picking up,” said one trader. “Buyers have been more aggressive, and sellers have held back on offers, so it seems as if the market is shorter than everyone previously thought.”

The November benzene contract was agreed at a US dollar concept of $1,167/tonne FOB (free on board) NWE (northwest Europe).

The key driver of global benzene pricing remains the US market, where spot values have seen a steady incline since last week on the back of some short-covering.

With prices in the region approaching $4.15/gal, several traders noted that this would potentially see the arbitrage window from Europe into the US around current domestic levels.

($1 = €0.74)

By: Truong Mellor
+44 208 652 3214

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