Price and market trends: Europe benzene settles up, driven by feedstock tightness

06 December 2013 09:52 Source:ICIS Chemical Business

Despite facilities coming on stream following maintenance, supply constraints remain

The December European benzene contract has been confirmed at €957/tonne FOB NWE, up €109/tonne from the previous month. The contract was agreed at a US dollar concept of $1,301/tonne and converted to the euro price at the agreed exchange rate of €1:$1.3595.


 Prices are pumping up for Europe benzene

Copyright: RexFeatures

Despite slower demand among key derivative markets ahead of December and the holiday period, some tightness on feedstock availability has supported a sharp upturn in pricing towards the end of last month, and a sizable increase had been predicted.

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 have improved availability of feedstock pyrolysis gasoline (pygas) and added 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.

Even with several crackers coming back online after maintenance turnarounds, there remains a backlog in the supply chain which is keeping availability tight at least for prompt material.

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 $1,327/tonne.

“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.

Sources in the phenolic chain have expressed concern that increase of this magnitude 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.”

By Truong Mellor