Price and market trends: Europe July benzene contract falls

12 July 2013 09:34 Source:ICIS Chemical Business

Europe leads the global price decline as spot prices fell throughout June on weak macroeconomic sentiment

The European July benzene contract has been confirmed at €978/tonne, down €67/tonne from the previous month, as the initial settlement received further support from players on 1 July.

One major consumer said on Friday, 28 June it had settled July with all of its suppliers at €978/tonne, and this was subsequently confirmed by another buyer.

Sellers later confirmed that they had agreed July volumes at this level.

"The [spot] range was wider this time, which always makes it difficult to know where the [contract price] will land," one producer said. "When the market has seen a big drop it's tougher to negotiate, but the number for July was a fair one."

The contract was agreed at a US dollar concept of $1,274/tonne FOB (free on board) NWE (northwest Europe) and converted to the euro price at the agreed exchange rate of €1:$1.3027.

A decrease was widely expected as the European spot market fell sharply towards the end of June on bearish macroeconomic sentiment, and weak benzene pricing in both the US and Asia.

While the European spot market moved as low as $1,240/tonne CIF (cost, insurance and freight) ARA (Amsterdam-Rotterdam-Antwerp) for July delivery on Thursday, 27 June, there was a recovering bounce towards the end of the week ended 28 June in line with firmer US numbers.

One consumer, however, felt that the downtrend towards the end of June was largely Europe-driven. "It started in Europe, and the US and Asia followed," the consumer explained. "There is a lot of imported material coming in, up to 40,000 tonnes, and this has put pressure on July."

The US July benzene contract settled at $4.07/gal on Friday, 28 June, down 35 cents/gal in line with current spot prices, which have plummeted to yearly lows on the back of ample availability in the region and thin buying interest.

Weak demand and ample supply has also weighed down on the Asian benzene market in June, with the US/Asia arbitrage narrowing to less than the freight costs involved for export earlier this year, which has led to stocks building up within the region.

Several Korean suppliers said that they were buying US material to supply their customers as opposed to shipping cargo from Asia, while Japanese producers have also scaled back on US-bound exports.

By Truong Mellor