Corrected: Europe benzene spot still firm in tight market
Truong Mellor
10-Jul-2014
Correction: In the ICIS story headlined “Europe benzene spot still firm in tight market” dated 10 July 2014, please read in the second paragraph … July Europe benzene contract at $1,466/tonne… instead of… July Europe benzene contract at $1,499/tonne…A corrected story follows.
Focus article by Truong Mellor
LONDON
(ICIS)–European benzene spot numbers have remained firm so
far in July, sources said on Thursday, with offers reaching
$1,500/tonne midweek amid tight regional availability.
Following the settlement of the July Europe benzene contract at
$1,466/tonne FOB (free on board) NWE (northwest
Europe), spot pricing has held above this level. The
market has been thinly traded so far this week, but a deal
for July at $1,485/tonne was reported late on Wednesday 9
July.
Offers for July spot material were at $1,490/tonne this
morning, but were not met with any firm corresponding bids in
a thin market. August was backwardated, with offers at
$1,455/tonne.
“It’s tight in Europe,” said one supplier. “There’s not that
many sellers and the market is still very illiquid.”
The current upturn in pricing began last month, with a strong US
market pulling volume out of Europe and firmer naphtha and
energy costs also applying upward pressure on spot
numbers.
The naphtha/benzene spread could provide some insight into
benzene price direction in the coming weeks. The margin
between the two products has been steadily growing over the
last few years (see chart below), and stands at around
$550/tonne given today’s spot numbers, which for many is the
current ceiling for Europe.
While a US market that continues to hover around the $5.00/gal
level supports higher European pricing, sources felt
that the main driver is the constraint on availability.
Structurally, Europe is expected to stay tight and dependent on imports to make up
the regional shortfall. This will keep pricing volatile and
dependent on global movements.
However, with four new benzene units with a total capacity of
2m tonnes/year expected to come online in Asia by the end of
July, this could help ease global availability and pricing,
with material moving to the US helping to bring spot levels
down from the structural highs seen.
Already, there have been more exports from Asia to the
US fixed for July, with the arbitrage window
improving, although this is partly due to lower-than-expected
export levels in June.
In the toluene market, European players have also said that
the third quarter may see an uptake in HDA
(hydrodealkylation) production, which converts toluene
to benzene.
“There is no support for current European toluene pricing
from the US, so numbers will have to go down to make HDA
economics viable,” explained one toluene consumer. “Gasoline
levels are also too low to make blending interest an outlet
for toluene right now.”
Increased HDA output in Europe could help alleviate benzene
tightness, although much would depend on the price direction
of both products. Increased toluene demand could push spot
pricing higher, while improved availability of benzene would
almost invariably help the market move lower, limiting the
economics for HDA.
The fortunes of the styrene market, which accounts for over
50% of European benzene consumption, will also play a role in
the third quarter.
European styrene pricing currently faces some upward pressure, not least
because of bullish benzene values, but an upturn in
construction activity and a stronger Asian market pulling US
export volumes could support higher styrene numbers. This is
turn could lend support to European benzene pricing, even if
availability improves.
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