Jan NWE benzene steady so far but outlook unclear

08 January 2014 11:20 Source:ICIS News

By Truong Mellor

LONDON (ICIS)--Strong pricing in the US market as well as some domestic supply constraints have helped support European benzene numbers so far in January, sources said on Wednesday.

However, there remains some uncertainty about global price direction for the first quarter of the year and no sense of any significant upturn in European derivative demand.

After the settlement of the European January contract at $1,373/tonne FOB (free on board) NWE (northwest Europe), spot pricing for the current month has since remained fairly steady.

Deals have been done at $1,360/tonne and $1,365/tonne, while some prompt availability concerns in Europe have seen the first half of January offered as high as $1,400/tonne earlier this week.

By midweek, continued upward movement in the US kept benzene numbers firm, with January valued at $1,375-1,390/tonne and bids for the first half of the month slightly higher at $1,380/tonne with no firm corresponding offers.

With INEOS closing down a 295,000 tonne/year benzene unit at Grangemouth, UK, and ongoing problems at Total’s site in Gonfreville, France, there is a sense that the market is physically tight at present.

Some sources, however, are less convinced that Europe faces a squeeze on material this month.

“The reformer at Antwerp is still down, but elsewhere production and availability is okay,” said one trader, adding however that “there is still an unclear picture though, with many people only just returning to work and checking emails after the holidays.”

There is also currently a planned two-week maintenance shutdown at Galp’s aromatics complex in Oporto, Portugal from January 4-20, but sources believe that, as this is a smaller benzene unit of around 60,000 tonnes/year, the overall impact on regional benzene supply has been minimal.

Nevertheless, spot pricing has proven resilient to seasonally slow pull from key end use markets such as styrene – where European numbers are still bolstered by issues of supply rather than demand – and phenol, which continues to face the twin pressures of poor demand and cheap imported volumes.

There is talk that one major European styrene producer has been purchasing ethylbenzene (EB) to fulfil commitments after declaring force majeure on styrene monomer (SM), an indication that benzene availability is currently restricted despite lacklustre derivative offtake.

Additionally, the US benzene market remains a driving force for European pricing this month following the January contract settlement at $4.84/gal FOB – around the $1,450/tonne mark – which has opened the arbitrage window from Europe into the US.

Since then, spot pricing has continued to edge upward, with the bid/offer range reaching $4.90-4.95/gal FOB amid short covering and prompt supply concerns.

Despite the market being long for most of 2013, US benzene numbers have surged upwards since a fire broke out at Chevron’s Pascagoula refinery in Mississippi in mid-November.

By Truong Mellor