The Urethane Blog

Benzene Expected to Rise

AFPM `15: US benzene prices expected to rise in Q2

29 March 2015 19:00 Source:ICIS News

ICIS analysisSAN ANTONIO, Texas (ICIS)–US benzene spot and contract prices are expected to increase in the second quarter on straightforward market fundamentals, aromatics sources said heading into this year’s American Fuel & Petrochemical Manufacturers (AFPM) International Petrochemical Conference (IPC).

“Benzene will be up,” a styrene producer said on Friday. “And the bottom line is that this is pure supply and demand."

With downstream styrene supply tightened by domestic demand and strong export interest, benzene is also tight on energy costs, derivative demand and insufficient benzene imports.

While the styrene producer expects to maintain only thin margins in April and May because of higher near-term feedstock benzene prices, supply constraints will continue to give styrene sellers some edge in price talks. Scheduled prompt styrene shipments to Asia and Europe totalled nearly 54,000 tonnes this week, and tight conditions in that market are expected to continue.

There is also a generally bullish view of benzene’s derivative markets this spring, including paint and coatings demand and acrylonitrile butadiene styrene (ABS) demand in the tyre market.

Styrolution’s 450,000 tonne/year styrene plant in Texas City, Texas, recently restarted with a large appetite for benzene, although upcoming maintenance planned by two styrene producers, sources said, will help temper near-term benzene demand.

Benzene supply constraints also stem from a lack of imports from Asia and Europe on closed arbitrage, although sources said the trade window with Europe had reopened late last week.

As for the upcoming April benzene contract settlement, sources suggest values could be substantially higher, depending, as always, on the level of spot trades in the last few days of March.

Sellers might now try to push spot pricing up in an effort to escalate the April benzene contract. “It’s like the full moon,” said an aromatics broker with regards to this possibility, “monthly and inevitable.”

US April prompt spot benzene closed higher this week within a range of $2.53-2.67/galFOB (free on board) on confirmed business this week. In the past month alone, spot benzene prices have increased by nearly 12%.

Meanwhile, the benzene market remained in contango, with May heard 2-3 cents/gal higher than April.

Major US benzene producers include ExxonMobil, Flint Hills Resources, LyondellBasell, Marathon, Shell, and Phillips 66.

The IPC takes places from 29-31 March in San Antonio, Texas.

By Larry Terry