Europe benzene spot still firm on tight prompt material, good demand from styrene

15 December 2017 13:21 Source:ICIS News

Pictured: Shell’s Rheinland facility Source: Shell

LONDON (ICIS)--European benzene spot prices firmed further this week amid upward pressure from the crude oil market and tight supply for prompt or early January material, players said on Friday.

Customers willing to receive prompt or early January deliveries are having to pay a higher price.

December numbers were still trading well-above $1,000/tonne but any January values hardly followed towards that direction, making the spread between the two rather substantial.

Based on that, it is widely expected that a correction should be imminent for the market to return to more sustainable levels, although this had initially been anticipated to occur towards the end of November.

Nevertheless, following a small drop in spot prices shortly after the December contract settled, the market kept firming, as there have been rather significant volumes that were sent to the US to support supply due to the recent production limitations there.

Players now feel that European spot pricing might come off from the second half of January onwards, as the market will be getting closer to the downstream styrene turnaround season, which is forecast to reduce benzene consumption, making more material available.

As the styrene market prepares for the maintenance season, most likely to begin in February and last until probably the end of the first half of the year, benzene demand has stayed on a good level as styrene producers are running their units as hard as they can.

Still, some expectations on benzene demand for the first quarter of the year are bearish also because some styrene units in the US will be on planned shutdown during that period as well and, therefore, any European exports will probably be not feasible.

There are players that believe that benzene could remain strong going into January but the market will most likely look different towards the end of next month.

Back on availability, even if prompt material looks tight, the market does not feel tight overall.

Some traders said imports that were initially destined for the Mediterranean region were coming into northwest Europe, a further indication that supply fundamentals were healthy in that region.

It was not clear why these imports, usually from the Middle East, had now a different direction, but some sources thought that maybe demand in the Mediterranean was not as good or there was simply an excess of imported material and the extra volumes had to find another home.

On the production side, there have been some cracker issues during the course of the week that could potentially impact benzene pricing and availability, although the market had not reacted yet by the time of writing.

Around mid-week, Czech Republic’s Unipetrol declared force majeure (FM) in relation to production stoppages and reductions caused by a fire that hit its partial oxidation (POX) unit at the Litvinov refining and petrochemicals complex, according to the company.

Output rates of the 545,000 tonne/year steam cracker and refinery at the site have been reduced, while installations producing hydrogen and ammonia have been shut down following a blaze on 12 December, the company said.

Reflecting on that, benzene players said that it looked like a minor issue given that the same unit has had several problems in the past and was not running properly.

On Wednesday (13 December) afternoon, Anglo-Dutch energy major Shell reported flaring at its Rhineland refinery in Wesseling, Germany, caused by a system failure.

According to the company’s statement, the local fire brigade authorities were immediately called to the site. Further information by Shell is still pending.

Based on local media reports, there was heavy smoke and flames over the refinery, but no apparent danger for people living in the surrounding areas.

Later on Wednesday evening, the flaring had eased off.

Towards the end of the week, there had been no update from the company's side but benzene sources believed it was nothing significant, judging from the market’s reaction.

Moreover, Dow's cracker No2 in Terneuzen, the Netherlands, has been down since Monday (11 December), according to a company source, who added that the issues that caused the outage are being addressed and are expected to be resolved without significant downtime.

Meanwhile, there was market talk for hiccups at other crackers in the European region with some of them possibly running at reduced rates but no clarity was available by the time of writing.

Regarding the European benzene January contract settlement expected later this month, players said that its outcome would largely depend on supply and how the latest issues at Shell and Dow develop.

If the spot price level remains firm, then an increase in the contract price should not be excluded. However, any further estimate seems not possible at the moment.

Benzene is used to produce a number of intermediates that are used to create polymers, solvents and detergents.

Pictured: Shell’s Rheinland facility
Source: Shell

Focus article by Vasiliki Parapouli

Additional reporting by Nel Weddle

By Vasiliki Parapouli