Benzene prices may be about to tell us something quite important about future profitability trends for the chemical industry. As the chart shows, benzene has hit a price ceiling at around $1200/t over the past 4 years in European markets. Yet crude has been climbing, from an average $38/bbl in 2004 to average $95/bbl so far this year.
Equally benzene prices, normally the most volatile of all the petchems, have suddenly become quite ‘normal’. Volatility was typically above 100% between 2001 – 2004, using average European monthly spot prices reported by ICIS pricing. But so far this year, they have moved within just a 12% range, after a range of only 27% in 2007.
The $1200/t price ceiling suggests that it has now become very difficult to pass on today’s higher crude/feedstock prices. Equally, it seems unlikely that benzene prices will remain unnaturally stable for very much longer. If they start to slip, whilst naphtha stays strong, then we will know that the outlook for commodity petchem profitability itself has also weakened.