Focus Article by Truong Mellor
LONDON (ICIS)–Higher US pricing and steady exports out of the region this month have helped push European benzene spot numbers higher, sources said on Tuesday, with the market poised for an increase in the monthly contract settlement for April next week.
With US benzene spot numbers for April edging above $2.60/gal this week, this was supporting an arbitrage window from Europe across the Atlantic at over $700/tonne.
The US Gulf region has seen limited imports from Asia and firming downstream demand, helping push prices up towards the end of last week.
This is turn has bolstered European benzene pricing after some sluggishness earlier this month. March traded on Monday this week at $700/tonne, and opened today at $700-740/tonne. The market remains in a firm contango, with April bids and offers at $730-750/tonne this morning.
The March European benzene contract was settled at $611/tonne (€540/tonne in euro terms) FOB (free on board) NWE (northwest Europe), so players are expecting a sizable increase for the upcoming monthly settlement.
With a triple-digit increase in US dollar terms likely, downstream European sources are watching the current exchange rate dynamics, as the weak euro against the dollar will amplify any increase seen in the April contract.
Benzene spot prices saw some initial upward movement in March, with deals done as high as $730/tonne CIF (cost, insurance and freight) ARA (Amsterdam-Rotterdam-Antwerp) on the back of a strengthening Asian market.
Sources also reported that some of the length on benzene and pygas that had built up since the start of the year due to healthy cracker run rates was starting to clear out through exports to the US and even Asia this month.
However, the current spate of styrene turnarounds in Europe has limited benzene offtake and kept downward pressure on the prompt market. This combined with some price erosion in the Asian market last week pulled March spot numbers as low as $620/tonne before some recovery late in the week (see graph).
But despite the current upward momentum, many players remain uncertain of any wider direction for European benzene into the second quarter. The global benzene market was expected to tighten with the numerous phenol plants in China coming onstream in the second half of the year, but several turnarounds could counteract any upturn in demand.
Likewise, sources are also wary of crude oil pricing going forward, with building stocks in both Asia and the US likely to spark a sell-off in the coming weeks, according to some analysts. Any major shifts on crude oil would potentially have a massive impact on benzene pricing.