29 November 2013 17:24 [Source: ICB]
Feedstock supply trends and the implications of refinery changes will have a “game changing” impact on the global benzene market, a senior industry analyst said.
Speaking at the 12th ICIS World Aromatics and Derivatives conference on 20 November, Zakeriyya Gemici, a senior associate at Booz & Co., highlighted three crucial supply trends: the switch from naphtha to NGL (natural gas liquid) feedstock, the coal-to-olefin (CTO) industry in China, and growing regulatory pressures.
While much of the industry focus has so far been on shale gas and oil in North America, Gemici pointed out several other developments that could impact the aromatics sector: associated gas in both Russia and Iraq, the CTO developments in China, and shale gas in China. Gemici noted that while these four potential feedstock developments face challenges of infrastructure, logistics and even NGL content, the impact of displacing naphtha cracking, increased ethanol blending and lower gasoline demand could lead to a 5m tonne global shortage of benzene by 2025, given current demand expectations.
Reformate extraction unit utilisation rates are declining due to the favouring of lighter feedstocks over naphtha, and the shortfall in BTX is being filled by swing TDP (toluene disproportionation) capacity. However, Gemici noted that the impact of this has been evident in recent years in pricing volatility.
“The higher pricing and volatility in benzene and PX since 2004, and the spreads with naphtha, are not related to crude oil,” he said. “There is something in these markets.”
Coal-based benzene, a key source of benzene in the Chinese market, has also suffered from the downturn in the Chinese steel industry. “These developments have implications for all players across the value chain,” Gemici said.
Nevertheless, he identified some opportunities to maximise value for each molecule through diversification. Upstream players could move downstream, while integrated aromatics players could build trading and storage capabilities to maximise revenue potential.
Gemici also noted that derivative players could benefit from investment in reformate extraction and technologies that rely on C2/C3 values chains. While there is a concern this would leave players at the mercy of naphtha and oil volatility, Gemici believed that this was less unpredictable than the benzene market and its correlation to naphtha.
The 12th ICIS World Aromatics and Derivatives conference runs from 20-21 November, 2013.
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