Europe spot benzene 'more like a casino than ever'

07 April 2014 12:01 Source:ICIS News

LONDON (ICIS)--Prompt regional tightness is keeping European benzene spot numbers bullish so far in April, despite some easing of prices in the US and limited downstream appetite for the higher numbers, sources said on Monday.

After the monthly European contract for April was settled early last week at $1,402/tonne FOB NWE, spot levels continued to push higher for April. Deals for prompt delivery were done as high as $1,500/tonne CIF ARA, and there was talk of trades done higher than this, although these were not confirmed.

“There’s simply a lack of material,” one trader explained. “Cumene and MDI (methyl di-p-phenylene isocyanate) are running well, plus we saw a lot of pygas exported out of Europe when benzene numbers were low.”

The current month bullishness did also have an impact on May, with offers for the first half of the month hitting $1,450/tonne at one point during the week.

However, these quickly receded and the market kept a wide backwardation for the most part, although an unconfirmed deal for the first half of May was heard late in the week at $1,440/tonne.

April opened this morning with offers at $1,500/tonne and no firm bids. The first half of the month remained at a premium with offers at $1,525/tonne amid continued prompt tightness.

May saw offers at $1,430/tonne this morning but no firm corresponding bids, with some apprehension seen among buyers given steady-to-weaker global pricing.

Sources pointed out that April had held a steady backwardation of around $50/tonne throughout March, only to see an increase of over $30/tonne on the contract once it was settled.

For many, this was simply an indication of how volatile and unpredictable the European market remains into the second quarter of 2014.

The current tightness in Europe stems from a swathe of production problems in eastern and southern Europe and talk of limited run rates among producers in western Europe. Combined with fewer imports into the ARA region and limited naphtha cracking due to poor economics, this was keeping upward pressure on prices.

Average cracker margins based on liquefied petroleum gas (LPG) were at a €123/tonne advantage over naphtha during March, despite a rise in naphtha-based contract and spot margins and a softening in LPG contract cracker margins, according to ICIS margin data analysis.

Cracking with lighter feeds results in a lower aromatics yield, which has also restricted benzene availability into Q2.

The other impact of more LPG cracking is the additional ethylene produced, which will likely be used for styrene production. This has pulled on benzene over March and is also evidenced in ample styrene availability, which is keeping the spot market from moving up in tandem with benzene.

Following a bullish and volatile Q1, there were expectations that the benzene market could face a global downward correction in the coming months. US players expect the market to see prices ease in the second quarter as supply improves due to an influx of imports from overseas markets.

“Benzene used to have long-run price volatility; price trends over several months. Nowadays it is all short-term volatility over several weeks,” said one styrene trader. “It seems more like a casino than ever before.”

By Truong Mellor