Asia benzene pulls both ways
Asia’s benzene price movements in the second half of 2017 will be largely determined by stronger demand from key downstream sectors as well as higher supply from new regional capacity expansions and plant restarts, according to industry sources.
However, uncertainty over demand from major importers such as the US have added volatility to the regional price outlook for benzene, they said.
Late in the second quarter, styrene monomer (SM) and caprolactam spreads against benzene fell sharply, resulting in cutbacks in operating rates. This in turn slowed down consumption of benzene on top of downstream turnarounds. Moreover, SM players were concerned about high inventories at shore tank amid off-peak demand and this resulted in several plants in China opting for a shutdown and/or extending their turnarounds.
Similarly, caprolactam producers in China slashed their run rates in May as well on fast narrowing spreads against benzene. Looking ahead, however, downstream players expect benzene demand to pick up in the third quarter with higher consumption from downstream SM sector.
The upcoming stronger manufacturing season for downstream SM derivatives will boost consumption. While imports of benzene to China in May were down and June is estimated to weaken, inbound shipments in July are expected to grow on the back of the strong buying activity in the first half of June.
SOUTH KOREA PRODUCTION
Outside of China, South Korea’s production of benzene is expected to climb in the third quarter after debottlenecking activities conclude in June. South Korean producer Hanwha Total’s benzene capacity will increase by 70,000 tonnes/year at its existing 430,000 tonnes/year unit, and its existing 500,000 tonnes/year benzene unit will be back on line after completing a turnaround by the end of June, according to market sources.
Additionally, fellow South Korean producer KPIC has achieved on-spec production of benzene at its plant following a debottlenecking project. The expansion sees the company adding 80,000 tonnes/year of new benzene capacity to its existing 160,000 tonnes/year unit, according to market sources.
South Korean refiner S-Oil has also added more than 30,000 tonnes/year of benzene capacity after a debottlenecking project that ended in early May. The No 2 unit in Onsan had a previous capacity of 300,000 tonnes/year. Elsewhere, Nghi Son refinery’s 250,000 tonnes/year benzene production plant in Vietnam, is expected to start-up in the fourth quarter of 2017 or the first quarter of 2018.
On the derivatives front, Qingdao Soda’s 500,000 tonne/year SM plant has been delayed from May to September, while caprolactam producer Luxi Chemical has delayed its start up from June to mid-July following several delays.
Benzene’s arbitrage window to the US has been sporadic in the second quarter, with uncertainty in supply and demand conditions in the US and volatility in prices.
Market players had initially expected the gradual restart of three major SM plants in the US after turnarounds during the second quarter to increase demand, stabilise prices and show a clearer price direction. However, the market still remains uncertain on price movements for the remainder of this year.