By Ong Sheau Ling
SINGAPORE (ICIS)--China benzene import prices will remain at a standstill, following a second reduction in the local major’s list price in 2014, market players said on Monday.
Chinese importers have avoided buying spot purchases since early last year when the FOB (free on board) Korea prices swung above the CFR (cost and freight) China because. The FOB Korea pricing was previously tracking the upward drive in the US market, which had been stable to soft.
Price gap has further widened to more than $60/tonne on 17 February, after the local major cut its list price once more in China.
On 17 February, the Chinese major – Sinopec’s east branch announced a reduction in the benzene list price for the second time in 2014 by yuan (CNY) 200/tonne to CNY9,100 tonne ex-tank as quoted for Shanghai Petrochemical, Yangzi Petrochemical, Zhenhai Oil Refinery and Chemical, according to ICIS China.
The price offers were reduced because of ample supply amid poor demand conditions, market source said.
The equivalent import parity stood at $1,258/tonne CFR China for cargoes subject to 2% import duty, accounting for an exchange rate of CNY6.06 to a US dollar.
“The Korea export prices are still much higher than CFR China numbers,” a Chinese trader said.
Spot FOB Korea prices were discussed at $1,272-1,278/tonne for April loading, while April was priced at a backwardation of close to $26/tonne to second-half March, ICIS reported.
“In order for us to offer a cargo to China, a premium of at least $25/tonne is needed which will be closed to $1,330/tonne CFR China – more than $60/tonne than the Chinese domestic cargoes,” a South Korean trader said.
Even though imports have started to fall since last December, resulting in lower inventories, appetite to buy new spot cargoes was nearly absent, market players said.
China imported 67,451 tonnes in December 2013, down 35.7% from November 2013, according to the customs.
East China inventories, excluding Ningbo stood at 26,000 tonnes on 14 February, which was on a 30% decline since early January, ICIS China reported.
“Inventories are sufficient [in the local market] because downstream players are just working on hand-to-mouth basis,” a second China-based trader said.
It is just “impossible” to offer on a fixed pricing to China now, a Singapore-based trader said.
“Unless FOB Korea prices drop to Sinopec’s list price, or Sinopec raise prices to match FOB Korea prices, the Chinese import window will remain firmly shut,” a second Singapore-based trader said.
Additional reporting by Emma Shen