Asia benzene higher on buoyant crude, arbitrage play to US

Author: Clive Ong

2019/04/24

SINGAPORE (ICIS)--Asia’s benzene prices extended gains on the back of buoyant crude market and continued arbitrage play to the US.

Busan container port in South Korea (Photo by Jeon Heon-Kyun/EPA-EFE/REX/Shutterstock)

Spot prices increased to $650/tonne FOB (free on board) Korea this week, from $544.5/tonne FOB Korea in late March, when prices slumped due to a start-up of a new plant in China, ICIS data showed.

Firm crude futures amid positive economic data from China and concerns about supply tightness due to OPEC-led cuts and US sanctions on Iran and Venezuela provided ballast for Asian benzene market.

US crude futures topped $66/bbl, while Brent crude bested $74/bbl in recent trades.

The elevated export-driven FOB Korea benzene market continued to trade at a steep premium – currently at around $20/tonne – to the key import CFR (cost & freight) China market.

Typically, CFR China prices are higher than FOB Korea prices by around $20/tonne.

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Spot trades into China remained unviable, at least on a fixed price basis. While some sellers contemplated selling on a floating price basis, demand for imports was lacklustre.

Participants expect the current situation to persist in the near term until the condition in the US improves and causes prices there to ease.

“If US prices decline, then the FOB Korea and CFR China gap will start to narrow and then reverse,” said a trader in Korea.

In the US, benzene values have stayed buoyant as shipping conditions remained constrained at the Houston Ship Channel in the aftermath of a terminal tank fire at the Intercontinental Terminals Company in mid-March, and amid delays at the Mississippi River due to high water levels.

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European benzene prices are also rising due to a strike at Shell’s Moerdjik site in the Netherlands and plant turnarounds, prompting some traders to also turn their attention to this region for arbitrage opportunities from south Asia, which could reduce cargoes headed toward China.

“Some cargoes might find their way from India to Europe if prices are attractive,” said a South Korea-based broker.

Spot prices in Europe were firm at $740-770/tonne CIF (cost, insurance & freight) ARA Amsterdam-Rotterdam-Antwerp (ARA), ICIS data showed.

Benzene is used to produce a number of intermediates that are used to create polymers, solvents and detergents.

Focus article by Clive Ong