Asia’s benzene prices to track declines in US amid poor demand

Sheau Ling Ong

05-Sep-2014

Europe spot benzeneFocus story by Ong Sheau Ling

SINGAPORE (ICIS)–Asia’s benzene prices will likely continue to track the declines in the US market after registering heavy losses amid sluggish downstream demand, market players said on Friday.

Spot prices on Friday mid-day stood at $1,220-1,223/tonne FOB (free on board) Korea for November cargoes and at $1,225-1,230/tonne FOB Korea for second-half October parcels, down $15-20/tonne from the previous day’s close, according to ICIS.

Benzene prices in the US fell over the trading week to land at $4.35/gal DDP in the US Gulf coast, equivalent to around $1,300/tonne, as of 4 September’s close, traders said.

“Asia continues to follow the US market since there is not much outlet [demand] within Asia,” a Japanese trader said.

The lacklustre performance of the key benzene derivative, styrene monomer (SM), was a main reason for the reduced benzene demand within Asia, they said.

“[The] market is just so weak and the outlook is not getting better,” a South Korean trader said.

A Singapore-based trader added: “The key [to the benzene market] is SM, as long as [SM] does not perform, no way can [the benzene prices] improve”.

Spot November SM deals were $1,505-1,510/tonne CFR (cost and freight) China on Friday morning, ICIS reported.

“Demand is just so bad,” another Singapore-based trader said, adding that despite more than 10 turnarounds scheduled at SM facilities in the September-November period, the SM market may not see support because of prevailing high inventory levels in east China.

“With China still not buying benzene, Asian suppliers have to push more lots to US and this is dampening the market there,” a second South Korean trader said.

In September, about 110,000 tonnes of Asian material will head to the US, with around 80,000 tonnes estimated to be shipped out of South Korea, the trader said.

The volumes seen in November is 26% lower from the levels seen in August, with final exports to US from South Korea standing at 108,000 tonnes, according to market players.

“Although there are vessel delays from August loading [from South Korea] to September, US demand during the same period is lesser because of the upcoming downstream turnarounds,” a South Korean producer said.

Asian producers are likely to be pressured to push out more cargoes to the US going forward, with China unable to follow suit because of poor run rates at benzene derivatives units currently, coupled with several scheduled turnarounds, players said.

Asian supply of the material have increased since July following the start-up of South Korean firm SK Global Chemicals’ (SKGC) two new benzene facilities at Ulsan and Incheon, which are running at 100% and 90% respectively since August.

On top of these two new benzene units a total of 995,000 tonnes/year capacity, two additional new benzene plants – ONGC Mangalore Petrochemical Limited (OMPL) and Jurong Aromatics Corp (JAC) – will keep the supply long, traders said.

OMPL is expected to load its first benzene lot by end of this weekend, while JAC should produce on-spec benzene by early next week, traders added.

“More producers will seek to export to the US since Asia can’t absorb all these new volumes,” a second Singapore-based trader said.

Benzene demand in southeast Asia will shrink drastically for spot October parcels, as downstream units in the region will either be shut for maintenance or running at reduced rates because of insufficient co-feedstock olefins, they said.

“Thai, India and Singapore-originated cargoes may just start to head to the US starting from end September,” a third Singapore-based trader said.

“This is a vicious cycle. Asia sellers have no choice but to dump cargoes into the US…and the US price falls further that will depress the Asian pricing as well,” he said.

Some players in the market said that long-position traders may still fight to support the market, while short-covering activity may emerge if buyers see sufficient price declines.

Meanwhile, several benzene units will also be taken offline for maintenance from September through to the rest of the year, market players said.

However, demand lost from benzene downstream turnaround will still outstrip the benzene output lost, they added.

Styrene Monomer Turnarounds
Company Location Capacity (kt/year) Scheduled shutdown period/Start-up date
SKGC Ulsan, South Korea 350 Keep shut in Sep since late Jul
Tianjin Dagu Tianjin, China 500 20 Aug to 11 Sep
Idemitsu Kosan Tokuyama, Japan 120, 220 End-Aug to 20 Oct restart
Taiyo Oil Ube, Japan 370 19 Aug to 1 Oct restart
Formosa Chemical Fibre Corp (FCFC) Mailiao, Taiwan  600 1 Sep for 45 days
Idemitsu Styrene Malaysia 220 18 Aug to 15 Sep restart
Styrindo Mono Indonesia (SMI) Merak, Indonesia 250 Mid-Sep to end- Nov
Ellba Eastern Jurong Island, Singapore 550 Early Oct for 50 days
Qilu Petrochemicals Qilu, China 200 Early Oct for 1 month
Phenol      
Bluestar Harbin Petrochemical Harbin, China 120 25 Aug for 35 days
Sinopec Shanghai Gaoqiao Pudong, China 37.5, 62.5 Mid-Sep for 60 days
Chang Chun  Changshu, China 300 Early Oct to end Oct
Mitsui Chemicals Chiba, Japan 190 Early Oct for 42 days
LG Chem Yeosu, South Korea 300 25 Oct to 25 Nov
Chang Chun (Cumene) Jurong Island, Singapore 540 Early Oct for 45 days
MDI      
Wanhua Chemical Ningbo, China 1200 Oct to Nov
Nippon Polyurethane (NPU) Yamaguchi, Japan 200 15 Aug for 40 days
Benzene Turnarounds
Company Location Capacity (kt/year) Scheduled shutdown
LG Chem Yeosu, South Korea 240 Mid-Oct for 40 days
YNCC Yeosu, South Korea (No 3) 120 10 Sep to 23 Oct restart
OCI Yeosu, South Korea 150 10-30 Oct
Formosa Mailiao, Taiwan 450, 60 H2 Sep for 40-45 days
CPC Corp Kaohsiung, Taiwan 20 1-7 Oct
Pertamina Cilacap, Indonesia 120 End-Aug for 45 days
ExxonMobil Jurong Island, Singapore 340 Early Oct for one month?
Aromatics Thailand (PTTGC) Map Tha Phut, Thailand 355 Early-Nov for one month
Reliance Industries Limited (RIL)  Hazira, India 210 End-Sep for four weeks
Idemitsu Kosan Tokuyama, Japan 220 Sep-Oct
JX Nippon Oil & Energy Negishi, Japan 165 2 weeks in early Oct 
Showa Shell Yokkaichi, Japan 85 Mid-Oct to Nov
Tonen General Sakai, Japan 75 Sep-Oct
Zhenhai Oil Refinery and Chemical Ningbo, China 200 End-Oct for one month
China National Offshore Oil Corp (CNOOC) Huizhou, China 350 Oct for 45 days



Additional repoting by Clive Ong

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