Benzene hits eight-month high on strong Asia derivatives market
2020-11-20    [Source:Chemical week]

The spot benzene price in Europe has hit an eight-month high, pushed upward by strong downstream styrene values in Asia.

The spot CIF (cost, insurance, and freight) benzene import price in the Antwerp-Rotterdam-Amsterdam (ARA) hub stood at $620/metric ton, the highest since 6 March 2020, when the benzene price stood at $625/metric ton, according to OPIS data. “Nobody expected benzene to increase to such levels. A little over a month ago we were at below $400/metric ton. Styrene in Asia has been the main driver,” notes one industry source.

In October, styrene prices in Asia shot up amid growing demand and tighter supplies of the product, which increased benzene demand and widened the spread between naphtha and benzene. Benzene is a feedstock used in styrene production. Spot styrene ARA prices moved higher, gaining 63% from the start of October and reaching $1,000/metric ton on 17 November, the highest since 13 May 2019 when the styrene price stood at $1,005/metric ton.

“We may see some price fluctuations depending on what will happen in other regions, but we expect the naphtha–benzene spread in Europe to stay at around $200/metric ton for now, not just because of Asia but also because of positive signals, including crude oil prices and [the development] of the COVID-19 vaccine,” says one benzene supplier. “A spread of $20/metric ton wasn’t sustainable anymore,” the supplier says.

The benzene–naphtha spread provides a gauge to the profitability of benzene production, and historically, a profitable spread is estimated at around $200/metric ton, according to sources. The spread blew out to an eight-month high of $254.00/metric ton on 17 November, the widest level since 17 March, when the spread was at $254.75/metric ton. “We won’t go back down to [a spread of] $20/metric ton for sure,” says a benzene trader.

Benzene demand in Europe is estimated at 7 million metric tons/year, according to IHS Markit. Styrene, which is produced from ethylbenzene (EB), accounts for around 50% of benzene demand in western Europe.

Styrene derivatives demand was hit by the second lockdown in most European countries following increasing COVID-19 infections, according to Tobias Spyra, director/styrene at IHS Markit. However, demand has since increased through the third quarter. “In October and November, though, styrene supply and demand fundamentals in Europe have not changed severely, but the incremental ton has been priced much higher based on a theoretical arbitrage to Asia, both for styrene and then followed by benzene,” says Spyra.

Nevertheless, European styrene derivatives demand in November has been slightly above expectations for polystyrene (PS) and expanded polystyrene (EPS), which are used to produce packaging and insulation. “We continue to see strong demand from the packing industry due to increased online shopping during the lockdowns,” says one styrene supplier in Europe.

Demand for acrylonitrile-butadiene-styrene (ABS) and styrene-butadiene rubber (SBR), used in the automotive sector, has been hit hard by the COVID-19 pandemic, Spyra says. “The automotive industry is recovering. Car production numbers are increasing again, with around 1.8 million cars manufactured in Europe during October as well as September,” Spyra says. “However, 2020 will be still a disastrous year for the automotive industry.”

Some industry sources say demand recovery in the cumene sector, which goes into the production of phenol and consumes about 24% of European benzene, have contributed to benzene price improvements. “Demand is improving, bit-by-bit and is much closer now to pre-COVID levels,” says David Potter, executive director/phenolics at IHS Markit. “There has been a clear improvement into the nylon chain, which had seen demand drop by up to 50% at the worst point of the year. There is still work to do though, as operating rates are still below levels of the last two years,” Potter says.

One of the strongest performers in the benzene market has been nitrobenzene, a precursor for methylene di-para-phenylene isocyanate (MDI) production. It is the third biggest consumer of benzene in Europe, accounting for 16% of demand. “We are running at full rates and plan to continue that way for now,” says one MDI producer. “We have a seasonal low in the construction industry but MDI demand for insulation and appliances use remains strong,” the producer says.

Despite the recent uptrend in the benzene market, uncertainty around lockdown measures in Europe is souring market sentiment. “I worry about the time delay. Until now demand was relatively OK, but if we see more lockdowns, we may see less spending, and ultimately more pressure on industries,” says one source.

Benzene is used in the manufacturing of styrene, cumene, cyclohexane, and nitrobenzene, which have applications across a range of industries.

OPIS is an IHS Markit company.

Reprinted statement: This article is reprinted from other website, which only represents the opinions of the author and it does not represent the stand of this website. Please notify if violating the original author's copyright and we will remove it immediately.

About Us  |  Feedback  |  Clients  |  Contact
Tel: 0086-21-61250986 E-mail: Fax: 0086-21-61159277
© 2007 Suntower Consulting Limited.  All Rights Reserved  沪ICP备07503201号 gs沪公网安备31011202002186号