Asia benzene under pressure on supply, slight tightening in May

04 April 2018 07:11 Source:ICIS News

SINGAPORE (ICIS)--Asia benzene remains under pressure due to ample supply, a situation that may slightly change in the second half of May when some units have turnarounds planned.

With demand staying lacklustre after the Lunar New Year in February, inventories along eastern China have continued to build.

Stocks reached nearly 190,000 tonnes in late March from under 150,000 tonnes in mid-February, ICIS data showed.

Spot prices hovered around $950/tonne FOB (free on board) Korea in the second half of January but tumbled below $850/tonne FOB Korea in the second half of March.

The downtrend was more pronounced after the Lunar New Year holidays in mid-February as end-user demand remained tepid.

“End-user demand is generally slow with limited pick up so far,” said a broker in China.

China-based end-users with requirements have largely chosen to procure local cargoes, which are relatively cheap compared to imported parcels.

Apart from weak demand in the key Chinese market, other places in Asia like Taiwan and southeast Asia have also seen poor off takes in recent weeks as most users have sufficient stocks to meet near-term requirements.

Moreover, buyers were generally unhurried as they believed benzene supply to be ample.

“Buyers delayed commitments due to declining prices and high inventories,” added a trader in Singapore.

Some sellers expect buyers to emerge from the sidelines if the price downtrend terminates and the market starts to consolidate.

However, it appears that supply will continue to lengthen before any contraction can take place as some regional units will complete their turnarounds in the near term.

South Korea’s GS Caltex Oil is expected to restart its reformer within two weeks after taking it off line in late February for a turnaround.

SK Global Chemicals was understood to be restarting its 28,000 bbl/day reformer in mid-April after a turnaround that kicked off in mid-March.

S-Oil Corp plans to restart its aromatics unit in mid-April after a maintenance that began in early March.

In the near term, new supplies will also hit the market.

Petro Rabigh II has expected to have achieved on-spec production in late March at its 400,000 tonnes/year facility at the Kingdom of Saudi Arabia.

Market sources estimate that its cargoes could reach Asia sometime in May.

In southeast Asia, the Nghi Son Refinery and Petrochemicals in Vietnam is scheduled to have the commercial product available to the market in May, according to the company’s website.

The plant can produce around 250,000 tonnes of benzene annually.

However, the market could achieve more balance in May with downstream styrene and phenol plants complete their turnarounds by then.

This could spur demand for benzene and help work off excess material in the region.

Some players also hope for stronger demand from the US for Asia parcels which would provide another important outlet for regional cargoes.

The arbitrage window was mostly open in March but weak demand over in the US has resulted in more Asia cargoes circulating here.

Benzene players in Asia were hoping that the US demand could improve in May or June, which will result in more deep-sea Asia parcels.

However, that demand is not certain under the clouds of an escalating trade war between the US and China.

Supply in Asia could tighten in May although demand would have to improve to soak up the excess availability in the region.

Two South Korean plants are expected to have scheduled maintenance at the end of May.

SK Global Chemical’s 45,000 bbl/day reformer and Ulsan Aromatics’s 600,000 tonnes/year facility are expected to be taken off line in late May for maintenance in excess of one month.

In Indonesia, Pertamina plans to shut its 120,000 tonnes/year benzene facility in the first half of May for a two-week maintenance.

ICIS Editorial Chart goes hereTop image: Polystyrene sheets

Focus article by Clive Ong

By Clive Ong