However, with a worsening outlook for China, demand from key end-use markets is unlikely to support benzene
Some prompt tightness and short covering in the market has pushed European benzene prices back above $1,400/tonne, sources said on 19 March, although there is still a firm backwardation into April.
The European market had proven resilient to lower numbers in both Asia and the US earlier this month, as a raft of benzene and pyrolysis gasoline (pygas) exports out of the region in February was keeping availability balanced overall.
While some players noted that the supply/demand balance was likely to improve into the second quarter, with several major suppliers back in the market in March, there is still a squeeze on prompt availability and some potential short covering pushing spot numbers higher.
After trading as high as $1,385/tonne the previous week, March spot numbers have pushed well above $1,400/tonne since 17 March, with offers reaching $1,440/tonne by midweek.
There was a prompt deal done at $1,390/tonne earlier in the week, and there was talk of a deal later done at $1,430/tonne, but this was said to be part of a roll deal with the first half of April.
Indeed, some of the upward pressure has crept into next month, with offers for the first half of April moving as high as $1,400/tonne.
However, downstream sentiment in Europe remains steady at best so far. Styrene prices have yet to breach the $1,600/tonne level for March, although April remains firmer following a deal done at $1,635/tonne on 18 March.
But any-April benzene now being valued around $1,370/tonne was keeping some upward pressure on styrene as the spread between the two is now close to the historical break-even cost.
Combined with renewed macroeconomic concerns regarding China, there is also no real sense that demand from key end-use markets is supporting any continued bullishness on benzene in Europe.
Even with several factors pointing to an improvement in styrene in the coming weeks – turnarounds in Asia, renewed construction activity in Europe – players are likely to remain cautious overall.
There were several traders and buyers at the European Petrochemical Luncheon (EPL) in Madrid, Spain, earlier in March, arguing that the benzene market should be facing a global downwards correction on pricing following the volatility seen since late 2013 in Europe and the US in particular.
One consumer also noted that with spot benzene currently above the $1,400/tonne level again, this opened up the possibility of HDA production – converting toluene into benzene – as the spread between the two products has widened.
However, on purpose HDA benzene production depends upon a sustained margin between the two products, and for many the current European spot levels do not appear to be sustainable beyond the short term.
Limited arbitrage opportunities to the US and current European offtake levels are likely to cap any sustained upward movement on benzene spot pricing.