Northwest European benzene spot prices are poised to come under further downward pressure in September on a confluence of burgeoning length and a decline in demand from exports to the US Gulf and from within the region, market sources said this week.
On Wednesday, Northwest European benzene spot prices deflated effortlessly trailing the single largest day-on-day drop since June 26 in US Gulf benzene prices. The 5-30 day CIF ARA benchmark was assessed $16.50/mt lower to close at an assessment of $1,361/mt.
On Tuesday, US spot benzene prices dropped as inventory lengthened from shipment arrivals and amid persistently weak buying interest in downstream markets, sources said. August FOB and DDP assessments fell 14 cents and 13 cents respectively to a two-month low of 468 cents/gal ($1,423/mt) and 464 cents/gal ($1,411/mt), almost shutting the arbitrage window to Europe, which had been the main driver of NWE benzene prices.
Although US prices recorded a 4 cent rebound on Wednesday, industry observers said that the bearish price trend and momentum would likely be sustained into September, amid rising length in the US and limited consumption on the back of several styrene planned maintenances, which in turn implied lower demand for European benzene molecules.
Westlake Chemical shut its 570 million lb/year Lake Charles, Louisiana, styrene plant last week for four to six weeks while Styrolution will shut its 1.7 billion lb/year styrene plant at Bayport, Texas at the end of September until early November.
Recent arrivals of deepsea cargoes from Asia into the US Gulf should see the region more than satiated for the month forward, sources added.
"It is quite a big volume of benzene scheduled to arrive in the US from Asia for September plus the styrene shutdowns -- demand for benzene will not be great and supply is on the high side," said a trader.
Domestically, Italy's Versalis will be conducting maintenance at its 600,000 mt/year styrene monomer plant at Mantova in September-October, lasting over 55-60 days, lowering the region's requirements for benzene.
At the same time, a persistently poor styrene/benzene spread, assessed at $204/mt, would not incentivize higher styrene operations, sources added. Styrene monomer producers typically require a minimum breakeven spread of $200-250/mt.
"Styrene is not running full here in EU, rates are reduced and even with less pygas availability, the market is still pretty well supplied," said another source.
Looking out to September and in the fourth quarter, benzene supplies are also expected to lengthen as crackers shift to heavier feedstocks, and as positive margins would continue to support incremental benzene production from hydrodealkylation units.
The NWE toluene/benzene spread was assessed at $276/mt -- still representing good profits for hydrodealkylation producers who broke even at around $200-250/mt.
