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Global Aromatics Pricing Analysis



Benzene: Few trades in SE Asia on wide buy, sell gap; LatAm prices increase despite lower energy

Staff Reports

Global Aromatics Pricing Analysis



Benzene: Few trades in SE Asia on wide buy, sell gap; LatAm prices increase despite lower energy

Staff Reports



Asian benchmark falls $32/mt on week; European downstream demand subdued


Asia


Asian benzene prices were lower $6.50-$16/mt July 8, pressured by weakness in the energy complex. The FOB Korea marker fell $16/mt from July 7, but rose $9/mt week on week, to be assessed at $642/mt July 8.


The CFR China marker dropped $6.50/mt from the day before, but was $12.50/mt higher from last Friday, at $653.50/mt Friday. The uptrend observed earlier this week was disrupted when crude oil prices fell Friday, pushing FOB Korea spot prices lower amid strong selling pressure.


Discussions for August were thin throughout the day, and only picked up offscreen during the Platts Market on Close assessment process, at $639-$643/mt.


September discussions ranged from $627-$633/mt throughout the day. The FOB USG Q3 price inched down 6 cents to 229 cents/gal Thursday, or $684.71/mt, keeping FOB USG-FOB Korea arbitrage window open Friday, with the price spread at $42.71/mt, able to cover prevailing freight costs for a 10,000-mt cargo at $36-$41/mt.


Analysis continues below...


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Last week, August-arrival cargoes were heard traded at $650-$655/mt CFR China earlier in the week, but import demand quietened after prices in the FOB Korea market increased.


Although domestic prompt prices in East China were at Yuan 5,300/mt ex-tank Friday, or $664.31/mt on an import parity basis, end-users were reluctant to accept higher import prices. Sellers kept offers at $660-$670/mt CFR China this week.


A Chinese source added that buyers would accept higher import prices this week if FOB Korea prices were still high. In Taiwan, a buy tender seeking 6,000 mt of benzene for second-half August delivery was heard awarded to two sellers at premiums of $18-$24/mt to the Platts FOB Korea assessment.


In Southeast Asia, thin activity was heard last week amid holidays. Buy ideas for H2 August arrival to Singapore were heard at parity to the FOB Korea assessment.


With limited supply still observed in Southeast Asia, sellers were said to be unable to accept the bid levels this week, resulting in thin trades. Based on Friday’s assessments, the benzene-naphtha spread was at $245.50/mt, and the SM-benzene spread at $397/mt.


Europe


Following the large daily gain of $13/mt on Thursday, the spot price fell marginally on July 8. The spot price was assessed at $660/mt CIF ARA Friday, down $5/mt, but up $4/mt on the week.


Asian prices took a large hit Friday and the FOB Korea price was assessed at $642/mt, declining $16/mt on the day. A weaker energy complex pulled down Asian prices Friday. The benzene market structure flattened Friday, from a small contango during the week. July and August were assessed at parity Friday, with bid-offer ranges also heard at parity the two months.


In the downstream styrene market, spot activity was heard quiet this week following the contract price settlements at the beginning of the month. Both the barge and truck contract prices were settled at Eur1,055/mt ($1,165/mt), falling Eur125/mt on the month, in line with market expectations.


National labor strikes in France had no impact on styrene production earlier in the week.


In late May, Total declared force majeure on styrene supplies from Gonfreville due to a strike, sending styrene spot prices soaring.


Latin America


Latin benzene rose $21/mt week on week, assessed July 8 at $615-$617/mt FOB Brazil, tracking higher US Gulf Coast values.


The US assessment rose on the week because of some supply shortages in the market even though benzene inventories were still in excess, sources in the region said.


The US is a common destination for Brazil-produced benzene. NYMEX crude settled for the week at $45.41/b, down $3.58 on the week. ICE August Brent settled down $3.59 for the period at $46.76/b.


Prompt-month US Gulf Coast benzene was roughly at a $15/mt premium to Northwest European benzene. Demand in Brazil was last talked weak due to the downstream demand, sources said.


Styrene, which is a feedstock for polystyrene, is the main downstream derivative of benzene and according to a source close to Unigel, styrene demand was also weak, leading to slower benzene demand.


Styrene demand dropped roughly 13% from May 2015 to May 2016, the source added.


In Argentina, the aromatics market was talked dull, a source close to Petrobras Argentina said.


US


US spot benzene assessments for July rose 7 cents from a week ago to 226 cents/gal FOB USG and 225 cents/gal DDP USG. August assessments rose 5 cents to 226 cents/gal FOB USG and 225 cents/gal DDP USG.


US benzene prices rose despite a weaker energy complex on some shortages in the market, although inventories still were in excess, sources said.


Cheaper energy and heavy feedstock supply for benzene supports expectations of cheaper benzene pricing on the horizon next week, sources said.


In energy, NYMEX front-month crude settled $3.58 lower this week at $45.41/b, putting the benzene-to-crude ratio for WTI at 2.09. The ICE Brent contract was up $3.59 over the same period to settle at $46.76/b, putting the benzene-to-crude ratio for Brent at 2.03. The benzene-to-RBOB spread was 88.92 cents/gal as front month NYMEX RBOB settled at 137.08 cents/gal, a decline of 14.27 cents from a week ago.


Arbitrage opportunities for Asian and European shipments to the US were closed on paper, according to S&P Global Platts data.


The FOB Korea-US spread was at $34/mt, based on an FOB Korea price of $642/mt and a US August price of $676/mt FOB USG. The Europe-US arbitrage spread was at parity, based on July pricing at $665/mt FOB Rotterdam. The US-Europe arbitrage was closed, with the spread at $16/mt, based on August pricing at $665/mt CIF ARA and a US July price of $676/mt.


In derivative markets, spot styrene for July and August were up 0.25 cent this week at assessments of 44.50 cents/lb FOB USG tracking Asian styrene spot pricing. The arbitrage to China remained open, but US spot supply was tight through August, sources said.


In the phenol market, the US spot export assessment increased $44/mt week on week to $783-$805/mt (35.50-36.50 cents/lb) FOB USG after July US benzene contracts settled 12-16 cents higher at a split of 212-216 cents/gal, sources said.


The domestic phenol assessment also was up $44/mt from a week ago at $893-$915/mt (40.50-41.50 cents/lb) FOB USG ex-tank Tuesday.


Toluene commentary: US disproportionation economics better; Sinopec cuts central China domestic prices







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