Benzene prices hit a ceiling

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.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. Paul is also an invited member of the World Economic Forum’s Global Agenda Council. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such as oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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