Europe benzene sentiment picks up ahead of Feb CP talks

Focus article by Truong Mellor

LONDON (ICIS)–After hovering around the $600/tonne mark throughout January, European benzene spot prices have recently seen an upturn ahead of the February contract discussions expected later this week, sources said on Monday.

January spot deals were done within a range of $587-605/tonne CIF ARA last week, before buy/sell ideas picked up. Bids moved as high as $620/tonne, but attention was primarily focused on the forward month.

February traded several times early last week at $605/tonne, before prices moved higher in tandem with steady oil and energy costs and some upward momentum in the Asian market. February traded at $650/tonne and $655/tonne on Friday 23 January.

Bids and offers for February this morning were lower again at $605-625/tonne CIF ARA, but the outlook for the rest of the week remains unclear, with prices tending to rally in the days leading up to the monthly contract settlement.

The January European benzene contract was confirmed earlier this month at €568/tonne FOB NWE – $693/tonne in US dollar terms.

While many in the market had been braced for another decrease on the February benzene settlement, the recent weakening of the euro against the US dollar is also likely to mitigate any reduction in the contract price for European players.

There were several theories as to why the spot market has reversed course as February draws to a close. Some pre-trading last week, ahead of the announcement by the European Central Bank (ECB) that it would keep interest rates in the eurozone unchanged as it embarks on a new quantitative easing (QE) programme, helped support upward movement on domestic pricing.

Renewed demand from Chinese players, steady crude oil and energy numbers and some gains in the US market all supported upward pricing movement in the Asian benzene market, pushing prices back above $700/tonne FOB Korea.

However, demand is expected to slow down later in Q1 amid some delayed phenol unit start-ups, and players do not see any fundamental shift in supply/demand dynamics, which have been weak since late Q3 last year.

Similarly, European players do not see any seismic changes in the domestic benzene market just yet.

“Benzene is not short,” said one industry source. “There is still lot of volume in the European market. Crackers have been running hard. It is definitely not fundamentals driving the market right now. Construction and styrenics demand is also in the traditional slow season.”

Nevertheless, European styrene pricing and sentiment has also seen an upturn towards the end of January, which some felt was helping support the upstream benzene market.

With the Asian styrene market still comfortably priced higher than Europe, this is pulling US and Middle East exports away from the ARA region. With a heavy turnaround schedule planned for the Korean styrene market towards the end of Q1, this could further support pricing in the region over February and March.

Sources spoke of up to 50,000 tonnes of US material being shipped into Asia over January and February, which will have an impact on European styrene supply levels by next month. There was already an estimated 15,000-20,000 tonnes of cargo leaving Europe for Asia this month.

In a market often characterised by sentiment over details, some European benzene players feel that the current upturn in pricing could simply be down to the market sensing that the bottom of the current cycle has been reached.

“This means that people will move and buy now rather than wait for next week,” said one consumer.