Reignited concerns over the domestic benzene demand as well as a stubbornly closed arbitrage to the US saw European benzene prices plunge below $1,300/mt for the first time since mid-October, Platts data show.
Benzene barges were assessed at $1,266.50/mt CIF ARA at Fridays' close, wiping out $83.50/mt week-on-week.
The last time benzene was assessed lower -- at $1,259.50/mt CIF ARA -- was on October 5.
Traders had an increasingly bearish outlook for the immediate future of the balance of supply and demand on the European continent, with a number of downstream turnarounds scheduled for March and the second quarter.
Among others these include maintenance works at Shell's Moerdijk and LyondellBasell's Maasvlakte styrene units, starting March, as well as turnarounds at Versalis' Mantova, Ineos Phenol's Antwerp phenol/acetone units.
Benzene prices have been set on a downward trajectory since January, despite initial expectations that producers of derivatives would go to the market for additional volumes in order to produce and accumulate stocks ahead of their turnarounds. "Length has been accumulating but only now people are realizing its magnitude, and importantly the US is not buying as expected," one trader said.
Another trader added that with the freight rates remaining in the high $60s/mt, European benzene continued to be prohibitively expensive for the American buyer, especially when the American market was still long.
Benzene for April dates was assessed at 435 cents/gallon DDP US Gulf Coast ($1,300.65/mt), keeping the arbitrage window closed.
Meanwhile, producers' margins have been squeezed significantly compared with December and January levels, with benzene's premium over naphtha dropping to the lowest level since mid-October.
The spread was assessed at $349/mt at Friday's close, down more than $70/mt week-on-week, as the decline in naphtha occurred at a slower rate than the deterioration of benzene values.
Naphtha has shed over 10% after hitting almost a year-high on February 19, as demand from gasoline blenders subsided and petrochemicals demand, already quite slow, was partially pulled away by more competitive LPGs. Naphtha was assessed at $917.50/mt CIF ARA Friday.
Despite the decline, benzene's premium over naphtha is still in healthy territory, sources said, as levels over $200/mt were already sufficient for benzene producers to break even.
One trader said, however, that he did not expect the spread to fall below $300/mt, as this would disincentivize benzene production and could see global benzene market short once all downstream units are back onstream after turnarounds.
At the same time, benzene's discount to styrene continues to widen, as traders expected the economics of the two products to diverge more following styrene units turnarounds and an expected seasonal uptick in demand. The styrene-benzene spread climbed to $384/mt, the highest level since October 3, when it was last seen over $400/mt mark.
Styrene was assessed at $1,650.50/mt FOB ARA at Friday's close.
There continue to be question marks over whether styrene market will see tightness or whether the accumulated stocks would be sufficient to sail through the turnarounds season without major issues.
