Europe benzene market bullish ahead of December CP

LONDON (ICIS)–Firming spot values throughout November are putting significant upward pressure on the European benzene market ahead of the December monthly contract settlement expected later this week, sources said on Thursday, despite seasonal weakness in key derivative markets.

December is traditionally a short month in terms of activity and offtake due to the holiday period, and players are generally in the midst of running down inventories ahead of year-end rather than building stock.

Additionally, with the completion of several cracker maintenance turnarounds in Europe, this should improve availability of feedstock pyrolysis gasoline (pygas) and add further downward pressure.

Yet the European benzene spot market has seen a steady price incline throughout November (see chart), with numbers edging over the $1,300/tonne in the last 10 days amid some bullishness created by the explosion at Total’s Antwerp site and confusion surrounding aromatics availability.

The uptrend stemming from this quickly faded, but a rallying of prices this week has seen December bids and offers reach $1,310-1,330/tonne, with the first half of the month valued higher with offers at $1,345/tonne.

Deals were initially done at $1,270/tonne and $1,275/tonne, but by midweek there was talk of trades as high as $1,320/tonne.

One trader commented that despite several crackers coming back online, there remains a backlog in the supply chain which is keeping availability tight at least for prompt material.

“We’ve also seen a lot of material leave Europe for both Asia and the US this month,” the trader said, adding that it expected that December prices could move as high as $1,370/tonne.

The fire at Chevron’s Pascagoula refinery in Mississippi also saw a spike in US pricing, and has pulled significant volumes out of Europe as players look to ship cargo to the region. This also explains the emergence of a premium for early December loading in the last week.

The November benzene contract was agreed at a US dollar concept of $1,167/tonne FOB (free on board) NWE (northwest Europe), so many downstream players are anxious about a triple-digit increase for the upcoming month.

Sources in the phenolic chain have already expressed concern that a sizable increase for benzene could not be supported by the market in December, which is traditionally the slowest month of the year in terms of demand.

However, there appears to be ample buying interest in the European benzene market at present, with December demand at least stable overall compared to November.

“The phenol guys won’t be happy,” said another source, “but an increase won’t have a huge impact as they will be buying lower volumes for December.”

($1 = €0.74)