SINGAPORE--Benzene availability in Asia is expected to remain high due to an influx of US imports, poor derivatives demand from styrene and weak export potential, which could see prices softening, market sources said on Wednesday.
Between 10,000-20,000 tonnes of benzene from the US could reach Asian shores from the end of July onwards to early August, and this could add to the already high supply levels, said concerned traders and producers. The trade flows are traditionally in the opposite direction, as Asia is net long and exports to the US.
"The benzene balance is slightly long, and some of it should go to the US," said a South Korean producer with regards to the usual exports.
The arbitrage window from Asia to the US however, remained firmly shut, as Asian prices were around $23-24/tonne higher than US values, which were at $ 4.34-4.37/gal FOB (free on board) HTC (Houston-Texas City) or $1,297-1,306/tonne FOB HTC on Tuesday.
The premium on Asian benzene against US continued to be a cause for concern among traders and exporters. Some traders said they were hoping that US prices would soon overtake Asia as this might reopen the arbitrage window.
"I am just hoping that the US and Europe benzene values go up," said a key benzene trader in Singapore.
Other traders said that the pressure to maintain the balance and prices in Asia could compel some traders to ship benzene to the US even though it might not be profitable to do so.
"Some of them might export to the US even though margins will be less, but this is to maintain the Asian price," said a Japanese trader. Asia is a net exporter of benzene to the US, but the steep increases in Asian values around May-June had resulted in arbitrage from the US.
A slowdown in demand from the derivatives segments with the start of turnarounds at SM plants was also expected to affect the benzene market, said traders.
Demand from the downstream styrene monomer (SM) and phenol segments had been weak in the past weeks. Squeezed production margins due to high feedstock ethylene and benzene values were the main reasons for this, said traders and producers.
Additionally, weak demand from the downstream styrenics was also heard to be adding pressure on tight SM margins.
"Demand from SM producers is not good, with almost every producer considering cutbacks in operating rates," said a South Korean producer.
Some key Japanese SM producers had even cut their production levels and were keeping operating rates at an estimated 75-85%, said traders.
On Wednesday, benzene prices in Asia firmed another $10/tonne to $1,320-1,330/tonne FOB Korea, mainly due to the strength in the US benzene market during overnight trading, said traders.
Crude values went up earlier this week to $131/bbl, recovering some of last week s heavy losses. Benzene prices followed this uptrend and jumped by $50/tonne from last Friday s close at $1,270-1,285/tonne FOB (free on board) Korea, rising steadily in three trading sessions.
Between 10,000-20,000 tonnes of benzene from the US could reach Asian shores from the end of July onwards to early August, and this could add to the already high supply levels, said concerned traders and producers. The trade flows are traditionally in the opposite direction, as Asia is net long and exports to the US.
"The benzene balance is slightly long, and some of it should go to the US," said a South Korean producer with regards to the usual exports.
The arbitrage window from Asia to the US however, remained firmly shut, as Asian prices were around $23-24/tonne higher than US values, which were at $ 4.34-4.37/gal FOB (free on board) HTC (Houston-Texas City) or $1,297-1,306/tonne FOB HTC on Tuesday.
The premium on Asian benzene against US continued to be a cause for concern among traders and exporters. Some traders said they were hoping that US prices would soon overtake Asia as this might reopen the arbitrage window.
"I am just hoping that the US and Europe benzene values go up," said a key benzene trader in Singapore.
Other traders said that the pressure to maintain the balance and prices in Asia could compel some traders to ship benzene to the US even though it might not be profitable to do so.
"Some of them might export to the US even though margins will be less, but this is to maintain the Asian price," said a Japanese trader. Asia is a net exporter of benzene to the US, but the steep increases in Asian values around May-June had resulted in arbitrage from the US.
A slowdown in demand from the derivatives segments with the start of turnarounds at SM plants was also expected to affect the benzene market, said traders.
Demand from the downstream styrene monomer (SM) and phenol segments had been weak in the past weeks. Squeezed production margins due to high feedstock ethylene and benzene values were the main reasons for this, said traders and producers.
Additionally, weak demand from the downstream styrenics was also heard to be adding pressure on tight SM margins.
"Demand from SM producers is not good, with almost every producer considering cutbacks in operating rates," said a South Korean producer.
Some key Japanese SM producers had even cut their production levels and were keeping operating rates at an estimated 75-85%, said traders.
On Wednesday, benzene prices in Asia firmed another $10/tonne to $1,320-1,330/tonne FOB Korea, mainly due to the strength in the US benzene market during overnight trading, said traders.
Crude values went up earlier this week to $131/bbl, recovering some of last week s heavy losses. Benzene prices followed this uptrend and jumped by $50/tonne from last Friday s close at $1,270-1,285/tonne FOB (free on board) Korea, rising steadily in three trading sessions.
