Benzene

20 August 2001 00:00 [Source: ICB]

Benzene is facing its worst decline for many years as downstream demand collapses. However, longer-term growth is stable with extra consumption forecast in Europe to 2005

Uses

Benzene is an aromatic feedstock and over half of its output feeds ethylbenzene (EB)/styrene demand. The second largest consumer is cumene, followed by cyclohexane, aniline/nitrobenzene and alkylbenzene. Benzene is also left in refinery streams and used in gasoline as an octane enhancer, although European regulations limited its content to 1% from 1 January 2000.

Supply/demand

Europe's current capacity is about 8.8m-8.9m tonne/year and markets are in surplus, mainly due to the 1% limit in gasoline imposed on 1 January 2000. At present, benzene is suffering the worst slump for possibly 20 years. Supply is long and demand is exceptionally low from all the derivatives, particularly the styrenic chain where polystyrene production has been cut, and consumers are lifting minimal contract volumes. Export opportunities to the US have been wiped out and the arbitrage has remained closed as the US has imported large volumes from Asia. BP has taken over Erdolchemie and last month agreed to take 51% in Veba Oel.

Pricing

Contract negotiations for the last two quarters have been marked by disagreement and split settlements. Quarter three contracts finally stuck at E293/tonne, E17/tonne lower than the first deal and E87/tonne lower than quarter two. Spot prices spiralled downwards for several weeks, losing $50/tonne in July alone. Price ideas dipped below $200/tonne in mid-July but recovered slightly to $205-210/tonne fob NWE in early August. The delta with naphtha, traditionally at $80-100/tonne, completely disappeared at one point in July but clawed back to $10/tonne in early August.

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Technology

The traditional production method via the distillation of light oils produced in coke manufacture has been overtaken by several routes. The main source in Europe is from pyrolysis gasoline coproduced in the steam cracking of naphtha, gasoil and condensates to make olefins. Other processes include hydrodealkylation (HDA) and the selective disproportionation of toluene (TDP). Benzene is also coproduced in BP/UOP's Cyclar process which converts propane/butane to aromatics.

Health and safety

Benzene is a clear, refractive liquid with a characteristic odour which is soluble in ethanol but only slightly soluble in water. It is highly flammable and burns with a sooty flame. The vapour forms explosive mixtures with air and flashback is a potential hazard. It is acutely toxic and vapour can be absorbed through the lungs or skin. It is a suspected carcinogen and a cumulative poison which builds up in the blood and body tissues.

Outlook

No improvement is expected for the rest of this year. CMAI's John Bonarius is predicting 2001 growth will be down by 2.7% over 2000. Styrene demand will be about 5% less, while cyclohexane consumption is forecast to be 20% down by year end. European demand growth is about 3.5%/year until 2005. Cumene will be the fastest growing derivative at 5.6%/year, with ethylbenzene/styrene growing at 4.3%/year worldwide. Shell's new 500 000 tonne/year plant at Moerdijk, the Netherlands, is due end 2002 and will feed a downstream EB unit which currently relies on imports. Increased consumption will come from Lyondell's 640 000 tonne/year styrene plant in Rotterdam in 2003. About 1.5m tonne of extra demand is expected in western/central Europe over the next four years. Western Europe will remain a significant importer and Bonarius estimates that, by 2003, the area's deficit will be over 700 000 tonne/year. However, the Middle East has excess capacity with more coming onstream during 2003 in Saudi Arabia and Iran.

WEST EUROPEAN BENZENE CAPACITY, '000 TONNE/YEAR

Company	Location	Capacity
Aral	Gelsenkirchen, Germany	200
Atofina	Feyzin, France	110
	Carling, France	300
	Gonfreville, France	200
BASF	Mannheim, Germany	320
	Antwerp, Belgium	250
Borealis	Porvoo, Finland	130
BP	Grangemouth, UK	297
Carboquimica	Padua, Italy	20
Cepsa	Algeciras, Spain	247
	Huelva, Spain	170
Conoco	Immingham, UK	200
Dow	Böhlen, Germany	320
	Terneuzen, Netherlands	900
DSM	Geleen, Netherlands	350
Enichem	Porto Marghera, Italy	110
	Porto Torres, Italy	230
	Priolo, Italy	390
	Sarroch, Italy	45
Erdolchemie*	Cologne, Germany	240
ExxonMobil	Botlek, Netherlands	600
FinaAntwerp Olefins
	Antwerp, Belgium	170
Gexaro**	Lavéra, France	200
Huntsman ICI	Wilton, UK	433
OMV	Burghausen, Germany	160
PCK	Schwedt, Germany	70
Petrogal	Oporto, Portugal	80
Repsol YPF	Puertollano, Spain	125
Rutgerswerke	Zelzate, Belgium	60
RWE-DEA	Heide, Germany	120
	Wesseling, Germany	160
Shell	Berre, France	85
	Godorf, Germany	510
	Stanlow, UK	240
Teer	Erkner, Germany	38
TotalFinaElf	Antwerp, Belgium	250
	Gonfreville, France	160
Veba+	Gelsenkirchen, Germany	380
	Lingen, Germany	75

*BP has 50%; **Atofina/BP; +BP has 51% Source: DewiTT/ecn

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