Mixed bag of fundamentals for ARA benzene in Sept
Truong Mellor
27-Aug-2014
Focus article by Truong Mellor
LONDON (ICIS)–With
spot prices hovering below $1,400/tonne this week, players in
the European benzene market are expecting some downward
movement for the upcoming September monthly contract, sources
said on Wednesday.
The market had been growing increasingly bullish in August
due to supply restrictions and firmer US
numbers, with September trading as high as
$1,390/tonne last week.
However, a slump in the US market late in the week due
to some aggressive selling brought European prices down, and
there were deals for September delivery done on Friday 22
August at $1,365/tonne.
This week opened with another September
deal done at $1,365/tonne, and the market began to edge up as
the week progressed, trading as high as $1,377.50/tonne on
Tuesday 26 August.
The August European benzene contract was
agreed at $1,450/tonne FOB NWE earlier this month. September
was valued at $1,355-1,365/tonne this morning, while October
was valued $10/tonne lower.
There is still some pressure on the
front end of the month, with bids for prompt September
delivery still commanding a $5/tonne premium earlier this
week.
However, any upward momentum for September
is being counterbalanced by slower derivative demand
both in Europe and abroad. While there are several
scheduled shutdowns on benzene in the
US beginning next month, these will be counteracted by
shutdowns in the downstream styrene market, so some players
in Europe do not see any major upward impact on US
pricing.
With a steady flow of spot and term cargo already fixed
to be shipped from Asia to the US in September, this should
also help redress any shortages in the market. Close
to 100,000 tonnes of material has been fixed for September
export to the US from Asia already, sources in the region
confirmed last week. In August, around 110,000 tonnes –
including spot and term – of Asian material were fixed to the
US.
There is also a sense that any continued upward
movement on European pricing will meet fierce resistance from
derivative markets, which will be struggling to get back on
track after a sluggish August.
“Benzene is too high still, and it is not
reflecting fundamentals,” said one downstream styrenics
producer. “The spread with naphtha at $500/tonne [see graph]
is not sustainable. It has been the physical arrival of
vessels that has kept the price inflated, and this is having
consequences downstream.”
Sources also highlighted the upcoming
cracker turnaround season in Europe, which will run from
September-October, and the potential impact this may have on
benzene availability.
However, the crackers involved were said
by one market source to be small or very localised, which
will in all likelihood minimise the overall impact on the
European market.
Several traders also pointed out that
crackers have been running light for a considerable time
already, restricting feedstock pygas supply, so the effect on
benzene may prove to be minor.
“There is a mixed bag of fundamentals,”
said one benzene trader. “Things could go either way in
September. If prices hit $1,350/tonne, buyers will come back
in at this level, but we don’t expect to see any
fireworks.”
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