Asia benzene up on firm crude; ample supply to cap further gains

03 October 2018 08:58 Source:ICIS News

SINGAPORE (ICIS)--Asia’s spot benzene prices were firmer despite the week-long holidays in the key Chinese market, riding on strong crude ahead of the US sanctions on Iran.

But ample supply across the region could cap further gains in the near term.

Ningbo port in China. (Source: Imaginechina/REX/Shutterstock)

 - Benzene breaches $880/tonne on crude gains

 - China inventories may rise post-holiday

 - China domestic benzene at parity with import prices

Spot benzene prices breached $880/tonne FOB (free on board) Korea this week as Brent crude futures rose to around the mid-$80/bbl levels, their highest in nearly four years.

On 28 September, spot benzene prices closed at $862.5/tonne FOB Korea, ICIS data showed.

China is currently on a week-long National Day holiday on 1-7 October.

“After the holidays, Chinese buyers might not be back into the market immediately,” a Singapore-based trader said.

China’s benzene inventories may build up after the holidays while end-user demand could take time to revive.

In September, shore tank inventories appeared to have stabilized at around 160,000 tonnes, after falling from more than 240,000 tonnes in June.

The ongoing US-China trade war, which caused the sharp depreciation of the yuan against the US dollar, dampened the appetite of Chinese buyers for benzene imports in July and August.

The consequent strong buying momentum for local cargoes in China have pushed up domestic benzene prices, which are now at parity with import material.

This could again result in more imports and a build-up in inventories along the shore tanks in the near term.

Supply in Asia is expected to remain long for the remainder of the year given limited plant turnarounds plans in the fourth quarter.

At the same time, the spot east-west arbitrage window remained closed for the most part of the year, with Asian sellers depending on outlets within the region to move their cargoes.

Benzene is a base chemical used to make other chemicals like styrene monomer, phenol and caprolactam.

Focus article by Clive Ong

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By Clive Ong