Asia benzene falls on crude rout as US-China trade war escalates

Clive Ong

12-Jul-2018

SINGAPORE (ICIS)–Asia’s benzene market weakened this week amid sharp falls in crude futures overnight, as global commodities markets were hit hard when the US threatened to impose tariffs on additional $200bn worth of Chinese goods.

Price indications for benzene on Thursday were down by more than $10/tonne from the previous day, on concerns over the escalating trade war between the US and China.

In early July, benzene was trading at above $830/tonne FOB (free on board) Korea, according to ICIS data.

Crude futures slumped at the close of trade on Wednesday, with Brent crude shedding $5.46/bbl to $73.40/bbl, while US crude was down $3.73/bbl at $70.38/bbl.

Concerns about the US-China trade war are expected to dominate the Asian benzene market in the near-term.

In the current escalation of the conflict, market players will remain cautious, resulting in a slowdown in spot trades.

ICIS Editorial Chart goes here

Spot benzene prices had been on an uptrend after touching $800/tonne FOB Korea in the second half of June, backed by a drawdown in inventories.

In the key China market, shore tank inventories declined to 235,500 tonnes for the week ended 6 July, down from 244,200 tonnes two weeks prior, according to ICIS estimates.

“The drawdown in inventories in China over the past two weeks helped lift the market,” said a broker in China.

However, the positive momentum appeared to have fizzled out as players shifted their focus on the escalation in the US-China trade row.

“The trade has turned cautious again given the increased uncertainty due to the trade war,” a Singapore-based trader said.

Benzene is a base chemical used to make other chemicals such as styrene monomer (SM), phenol and caprolactam.

Meanwhile, the benzene demand-supply balance in Asia is expected to turn more positive as the third quarter progressed.

Consumption would rise when a downstream SM plant and an aniline facility in China start up.

Also, with the third-quarter manufacturing-for-exports season in China, consumption of resins and chemicals usually improve.

This would also spur demand for benzene as it is a key feedstock for various downstream chemicals.

Focus article by Clive Ong

Picture: Container port in Qingdao, Shandong Province, east China (Photographer: Yu Fangping/Pacific Press via ZUMA Wire/REX/Shutterstock)

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