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DeWitt's News
 
Key Drivers - Apr 12,2012

Benzene & Styrene

Americas Spot prices slightly backwardated. No new spot deals, domestic prices sustained by high raw materials costs.
Europe The market is balanced with little price movement. Prices rose sharply on reports of a production problem in Moerdijk.
Asia Weak crude/naphtha pulls down benzene. SM firmer as China buyers look to cover for May.
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Supply & Demand
 
Market Commentary

Benzene - Newsletter#: 1808
Date: 05/19/2011

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Americas

The spot market trended lower this week due to uncertain demand, ongoing difficulties with logistics and comfortable (if only temporarily so) supplies of extraction feedstocks. May deals were done at $4.12 last Friday, then dipped to $3.98, before recovering to $4.05 yesterday on stronger WTI values. Today, the market was talked at ranges below $4.00 per gallon and one deal confirmed done at $3.97 per gallon, as crude oil prices fell again. A June deal was confirmed done as low as $3.95 per gallon, the low confirmed point for the week. The forward price curve remains virtually flat through August, as the market searches for price direction, amid macroeconomic uncertainty, and sell off of commodities. Although sentiment is not bullish, we do see several signs that could lead to higher benzene prices in the coming weeks: 1. In the past week, at least 30 KT of benzene was reportedly booked away from USGC and into Europe, presumably because that volume could not make its way to Mississippi River consumers or terminals. 2. A cargo of pygas was reportedly booked from USGC to Europe, presumably due to domestic logistics constraints. 3. Reformer margins have declined again, as regrade fell from 35 cpg to 15 cpg yesterday. Co-product xylenes and toluene prices have also fallen by 15%-20% off their highs four weeks ago. 4. Pygas production remains constrained, as ethylene producers continue to favor very light feedstocks and import volumes have declined. 5. Consumers report that Chevron at Pascagoula began a 50-day turnaround of its Pascagoula refinery. If that outage were to result in significant benzene production loss from the site’s 15,000 barrels/day (700 KTA) Aromax® unit, Gulf Coast balances, particularly along the lower Mississippi River, would be critically short as the River levels recede. 6. When River logistics normalize, Southeast Louisiana styrene and aniline units are expected to ramp up rates in order to rebuild inventory and meet pent up demand. Despite these factors, however, industry and trade sources are cautiously monitoring crude oil prices, fearful that the recent commodity “bubble” will burst, as it did in 2008, leading to a sharp sell off. Such caution could result in further upside price volatility, if future import volumes are minimized and consumer inventories are kept low. On margins, margins improved this week, with benzene taken at current monthly contract price, due to lower feedstock costs. On spot value basis, all margins are considerably lower, but only HDA units are unprofitable.

Europe

Spot product traded down from $1270 for May last Friday to lows of $1228 for May and $1225 for June on Tuesday evening. Brent fell below $109 at one point on Tuesday, its lowest level since February, but had recovered above $110 by the end of the day and has since been relatively stable around $112-$113. Naphtha traded below $950 on Tuesday, but has recovered back to $960-$970. Benzene prices picked up on Wednesday to $1240 and $1245, done for May, but transacted lower again on Thursday, with $1225 and $1230 reported for June. Later in the day, the bid/ask range had dropped to $1200-$1220 for both May and June, though without any reported deals. Differentials over naphtha have been in the range $220-$300 since mid-March, about the level we should expect to see them in a balanced market. At least 30kT benzene and perhaps more is reported fixed for May shipment from the US to Europe, prompted in part by short term logistical problems on the Mississippi. This may push Europe long in June, and certainly appears to be weighing on the market, though for now demand is holding up reasonably well and benzene stocks are under control. There are significant volumes of product arriving from Asia, in excess of 30kT between mid-May and mid-June, though much of this material is destined for the Mediterranean and will only impact the ARA market indirectly. Pygas availability is good. By next week, maintenance work should be limited to one cracker in Western Europe. The proportion of naphtha being cracked is relatively high for the season, because demand for co-products is stronger than for ethylene, which is coming under pressure from growing polymer imports. In addition, a 20KT pygas shipment is reported fixed from the US to Europe, a movement thought to be also the result of problems on the Mississippi. Reformate by contrast remains in relatively tight supply, the result of limited gasoline demand and poor refining margins. HDA economics are at best marginal, which is restricting benzene production from toluene and TX streams. Low water levels on the Rhine are creating significant headaches for a number of producers and consumers of benzene. Following the considerable success of our map of the Mississippi in last week’s newsletter, a similar map of the Rhine is included this week, with a commentary on current problems.

Asia

Asian markets have been subdued in line with weak crude oil prices and lackluster overseas benzene markets. Unlike the previous two weeks, crude oil prices failed to rebound early with WTI staying below $100/bbl on Monday and Tuesday. This kept buyers sidelined with naphtha and benzene down $30/MT in the early goings. Friday saw deals done at $1175 and $1177 FOB Korea for any July. By Monday, sentiment was down $5-$10 with a deal done at $1165 FOB Korea for any July. Tuesday saw further declines with naphtha down to $940 CFR Japan resulting in benzene done at $1150 FOB for July. Today’s sentiment has improved as WTI surged back to $100/bbl last night. Naphtha in turn shot up from $950$-955 in the morning to $970-$976 CFR Singapore at close of business with one deal done at $961 CFR for 2H July. This prompted deals to get done at $1163 FOB Korea for any July in the morning followed by $1150 FOB for any August in the afternoon. Bid/ask closed today at $1145/$1148 FOB Korea for July and $1135/$1145 FOB Korea for August or down $12-$13/MT compared to this morning. The outlook for benzene remains tied to crude oil in the near term given the lack of other strong factors. China continues to stay out of the import/export market with Sinopec slashing factory prices to Rmb 8200 this week. That prompted domestic spot prices to fall to Rmb 7900 or $980-$990 CFR import equivalent, keeping arbitrage closed. Note that spot activity is expected to come off early next week as a number of players will be departing for APIC on May 26-27. On external arbitrage, Korean export data indicated 61 KT loaded in April for export to e USG plus 12 KT loaded for Europe. Expectations for June arbitrage are lower at 40-50 KT due to tighter spreads.
Daily Prices

Benzene

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Unit

Market Date: 03/19/2012

RegionPriceUnitTypeDeliveryBidAskVolComments
Americas 1,250 $/MT DDPApril 20 1H - Freeport
  $/MT DDPMarch 1,242 1,257 HTC
  $/MT DDPApril 1,236 1,251 HTC
  1,245 $/MT DDPApril 20  
West Europe 1,200 $/MT CIFMarch 1,000  
  1,192 $/MT CIFMarch 1,000  
  1,190 $/MT CIFApril 1,000  
  $/MT CIFApril 1,185 1,195  
  $/MT CIFMarch 1,175 1,185  
Asia Pacific 1,180 $/MT FOBJune 3,000  
  1,180 $/MT FOBMay 3,000  
  $/MT FOBMay 1,175 1,180 3,000  
  $/MT FOBApril 1,175 1,180 3,000  
  $/MT FOBJune 1,175 1,180 3,000  
         

Historical Pricing
 
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