APIC ’15: Demand for benzene to be boosted by new phenol start-ups

SEOUL (ICIS)–The demand for benzene in Asia will likely be boosted by new phenol start-ups in China during the latter half of 2015, and this in turn will boost production rates in the region, an industry consultant said on Wednesday.

“The lower benzene utilisation rate in early part of the year is expected to improve towards the year-end,” said Ewe Ee Foong, ICIS Consulting’s vice president for Asia.

Benzene production in northeast Asia is expected to surge from around an estimated 5.5m tonnes in the first quarter of this year to close to 5.8m tonnes by the end of the fourth quarter of 2015, Ewe told attendees at the ICIS Asia Chemicals Market Seminar in Seoul, South Korea.

Phenol production in key market China will see a large increase through the course of 2015, with three worldscale phenol/acetone plants scheduled to start operations by the first quarter of 2015.

Together, the three are expected to boost China’s domestic phenol capacity by 46% to 2.53m tonnes/year of phenol.

The average benzene plant utilisation rate in northeast Asia, meanwhile, is expected to increase steadily from about 77% in the first quarter of this year to around 80% in the fourth quarter of 2015, he said.

Benzene demand growth for downstream styrene is lower compared to last year, weighed by poorer demand in China for polystyrene (PS) and styrenic resin, according to Ewe.

China spot appetite for benzene has slowed down in April amid high inventory levels, and this has weighed on prices, according to ICIS data.

In the second quarter, benzene prices in Asia could be buoyed by improved downstream styrene monomer (SM) demand in May when a spate of SM producers in the region end their plant turnarounds, the data showed.

Spot activity for benzene in Taiwan is likely to gain momentum in the second quarter with increased downstream SM operating rates amid healthy margins for downstream sectors, according to ICIS.

Spot benzene prices in Asia were lower in the week ended 30 April with market momentum lacklustre. It was a holiday-shortened week due to Labour Day holidays internationally and key regional market Japan was off on 29 April due to Golden Week holidays.

In other aromatics markets, toluene prices in Asia will continue to track downstream paraxylene (PX) closely in the second quarter of this year, but this correlation could weaken because of narrower PX-naphtha margins, according to ICIS.

Market players in the Asian toluene market were largely positive about price hikes in June, with several basing their hopes on the key China market and expecting buying momentum to continue.

However, other market players were cautious, saying that there were limitations to the price increase because downstream markets are not expected to see large hikes in prices.

Toluene demand is expected to pick up in May-August in preparation for the driving season within northeast Asia, but China’s imports through to May is likely to be slow and will not give much support to this increase in demand as government checks on the usage of toluene for blending is getting stricter.

In the Asian paraxylene (PX) market, the majority of market participants have agreed that current spot PX price movements are now largely influenced by downstream purified terephthalic acid (PTA) prices and market sentiment, ICIS data showed.

Downstream PTA demand in the key China markets remains the largest influencer for spot PX prices in Asia, the data showed.

The majority of market participants continue to monitor inventory levels of PTA products in the country, as this will impact run rates at PTA facilities, translating to the demand for spot PX material, according to ICIS.

Supply and demand conditions for the PX markets in Asia were largely agreed as tight for May, and balanced-to-tight in June. This is likely to keep PX spot prices supported in the near term, several market participants, ICIS data showed.

Going forward, the Asian PX market could remain volatile amid uncertainty in the downstream markets, according to ICIS.

On the production front, there is uncertainty over when Tuntex Petrochemical could restart its 40,000 tonne/year purified terephthalic acid (PTA) unit located at Tainan, Taiwan, while Xianglu Petrochemical on 6 April shut its 4.5m tonne/year purified terephthalic (PTA) unit at Gulei, with no certain dates for the facility to resume full operations, ICIS data showed.

The ICIS Asia Chemicals Market Seminar was organised on the sidelines of the Korea International Chemical (KICHEM) Industry Expo 2015 and the Asia Petrochemical Industry Conference (APIC) 2015 in Seoul.

KICHEM runs on 6-8 May while the 36th annual APIC will run on 7-8 May.

APIC 2015 will focus on the theme of “Turning Threats into Opportunities in Asian Petrochemical Industry”.

Additional reporting by Trixie Yap, Daphne Ho and Samuel Wong