Asia benzene derives strength solely from SM; spot demand weak

By Ong Sheau Ling

SINGAPORE (ICIS)–Asia’s benzene players are taking a more cautious stance on the market over the past two weeks, with prices largely tracking the strong downstream styrene monomer (SM) market, without support from spot demand, industry sources said on Tuesday.

Spot benzene prices have been rising since early this month, hitting a two-week high of $1,245/tonne FOB (free on board) on 11 July, fuelled by the sharp gains in crude futures, and in SM prices, which were hovering at a record high of around $1,850/tonne CFR (cost and freight) China levels, according to ICIS data.

“Demand [for benzene] in the previous week was actually weaker, but prices rose very quickly mainly because of SM,” a South Korean trader said.

A narrowing of the price gap between CFR China and FOB Korea prices have dampened the appetite of Chinese importers to procure benzene overseas, market players said.

“Discussions were active since end-June for CFR China basis. But, it just died down since last Wednesday when FOB Korea prices shot [up],” a Chinese broker said.

Spot CFR China deals for second-half July and August shipments were recorded at $1,210-1,220/tonne from end-June to 9 July, according to ICIS.

Chinese importers’s buying ideas at $1,200-1,230/tonne CFR China are at parity with domestic price quotes, traders said.

In east China, spot benzene prices closed on 15 July at yuan (CNY) 8,900-9,000/tonne ex-tank, CNY50/tonne higher from the previous day, according to ICIS.
Export opportunities to the US are still limited, because of negligible price gap between the US and Asian benzene, industry players said.

In the US, spot prices settled at $4.08-4.13/gal FOB for prompt barges on 15 July, lower by $5-10/tonne compared with Asian prices, which were at $1,225-1,235/tonne FOB Korea, ICIS reported.

For the month of July, mainly term volumes of 15,000 tonnes from South Korea and 18,000 tonnes from Japan flowed to the US, industry sources said.

A few suppliers in northeast Asia were previously looking at exporting August cargoes to the US given recent gains in the regional benzene market. But US prices retreated, foiling their earlier plan to export cargoes westward, they said.

“Not just demand is weaker, supply is getting more plentiful heading into second-half July,” a southeast Asian producer said.

Petrochemical Corp of Singapore (PCS) has restarted its No 1 aromatics plant at Ayer Merbau in Jurong Island on schedule after a 45-day maintenance from 1 June. The aromatics plant has a nameplate capacity of 100,000 tonnes/year of benzene; 50,000 tonnes/year of toluene; and 28,000 tonnes/year of solvent xylene (SX).

South Korea’s Lotte Chemical has its aromatics unit in Daesan on 8 July for catalyst regeneration that will last 10 days. The aromatics unit has a nameplate capacity of 360,000 tonnes/year of benzene, 120,000 tonnes/year of toluene and 60,000 tonnes/year of solvent xylene. Meanwhile, run rates of oher benzene plants are improving, market players said.

South Korea’s Yeochun NCC (YNCC) has increased run rates at its No 2 aromatics facility in Yeosu to 95% from 91% previously in the past few days. YNCC’s No 2 aromatics facility can produce 120,000 tonnes/year of benzene, 60,000 tonnes/year of toluene and 40,000 tonnes/year of solvent xylene.

Other benzene units in Japan and South Korean are largely running at full operations, supported by the healthy margins from a wider benzene-naphtha spread.

Benzene-naphtha spread for August stood at $310.50/tonne on 15 July’s close, much higher than the breakeven levels of $120-220/tonne of Asian benzene facilities, producers said.

“It is not justifiable for [benzene] prices to stay so high especially  [since the] supply-demand balance is getting longer. The only bullish factor now is SM,” a Japanese trader said.

($1 = €0.77 / $1 = CNY6.14)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections