By Truong Mellor
LONDON (ICIS)--The European benzene market is braced for a decrease on the monthly contract for March, sources said on Wednesday, as falling global prices and a sharp drop in Brent crude futures continue to pull spot numbers down.
Following a €113/tonne reduction for the February contract, European benzene values saw further erosion over the course of the month as the Lunar New Year holiday period dampened activity and pricing in Asia, and the bullishness seen in the US market eased.
February was settled at $1,408/tonne FOB (free on board) NWE (northwest Europe) and converted to the euro price at the agreed exchange rate of €1:$1.3538.
The European benzene market did see a brief recovery last week, with spot numbers edging back above $1,400/tonne (€1,078/tonne) CIF (cost, insurance and freight) ARA (Amsterdam-Rotterdam-Antwerp) as domestic output was curtailed.
The source added that the anticipation of several styrene turnarounds during March and April and the expected reduction in offtake had also led to benzene suppliers cutting back output.
One styrene consumer said there has been some posturing about benzene coming off line over this period and there will be a reduction in cracker output, but does not expect this to offset the lack of demand from the styrene market.
Despite the initial uptrend, a midweek plunge in Brent oil futures weighed down on the benzene market, and March deals were done as low as $1,380/tonne during the week ending February 22.
March opened this week with several deals at $1,390/tonne on Monday February 25, before lower Asian numbers and further crude losses brought the market down further. Deals for March were done at $1,375/tonne and $1,380/tonne as the week progressed, while April remained in contango with a deal done at $1,385/tonne.
Bids for March cargo were at $1,370/tonne this morning, but not met with any firm offers so far. April was valued higher at $1,380-1,405/tonne.
News of further price reductions on benzene will be welcomed by downstream players, who have struggled for months with the twin pressures of uncertain demand and soaring raw material costs.
“Prices have been crazy over the last few months,” said one player in the downstream phenol market. “We need another decrease. Benzene costs have had an impact on demand. End-use production stops because it’s just not worth it.”
However, despite the immediate bearishness in the benzene market, several downstream sources noted that the weak euro means that even a reduction in dollar terms could still see a higher euro number.
“Even if the March contract settles at $1,380/tonne, with today’s exchange rate that would still be an increase of over €20/tonne,” said a source in the styrene distribution market.
($1 = €0.77)