Benzene firms up again lifting the value chain

Asian benzene prices were on a bull-run since mid-May, gaining a total US$173.50 a ton until June-end, partly fuelled by supplies shortages in South Korea and Japan, as well as the strong crude prices. Asian markets were also influenced by the rising prices in US which opened the window for arbitrage trades from the region to the west since early June. Benzene prices in the US market were US$67-115 a ton higher than in Asia in May and June and the gap more than covered the US$55-60 freight cost for a 15,000 ton vessel from Asia to the US. This also implies that Asia’s benzene market has begun tracking US numbers.

In US, strong demand from downstream particularly, styrene monomer, was driving benzene prices amid tight supply caused by some production issues at the aromatics plants.

Spot benzene prices in Asia soared to their highest levels in more than 16 months. July was assessed at US$1,415-1,420 a ton FOB Korea, and August was at US$1,400-1,405 a ton FOB Korea. Prompt market US had reportedly reached US$1,600 a ton FOB levels and this was driving Asian numbers higher.

While this was goods for benzene makers, market players were worried about production margins in its derivative sectors which are fast turning negative. Nevertheless, they were hopeful that new benzene capacity starting up in August-September will help tame the soaring prices. Two large benzene units will come on stream in mid-July and would put off some steam in the Asian market.

In the second week ending 11 July, benzene prices in Asian markets were up over the week but fell on Friday as discussions opened lower on softening US prices. In Europe, trading intensified toward the weekend but prices were range bound throughout the week and there was no push either from buyers or sellers, as uncertainty remained the underlying factor. Slower demand and thin participation in the US spot benzene market resulted in pricing falling on the week. Asian benzene marker FOB Korea fell US$8 on Friday but was up US$7.50 week on week to be assessed at US$1,375-1,376 a ton FOB Korea. In Europe, spot barges were assessed at US$1,471-1,472 a ton FOB Rotterdam and US$1,461-1,462 a ton CIF ARA, both up US$3.50 on the week. In US, spot benzene pricing declined US cents 14 week on week to an assessment of US cents 500.95-501.05 a gallon FOB USG for July.

Derivative caprolactum prices moved up slightly on strong raw material and tight supply in Asian region. In China, demand from downstream nylon chip market was stable-to-higher while nylon textile yarn makers were also running modest run rate supporting caprolactum pricing. Asia caprolactum markers rose US$20-40 to US$2,240-2,250 a ton while negotiated prices were at US$2,210-2,240 a ton. In China, mid-to-low solid and liquid goods were traded at US$2,815-2,845 a ton, up US$75-105. DSM Nanjing Chemical raised its July price to US$3,010 a ton, up US$60 from June. Sinopec too hiked its price for July to US$2,980 a ton.

Further down, nylon chip prices were pushed up by the warming sentiment in caprolactum markets and low inventory amid modest demand in the week of 11 July. Semi-dull high-speed spinning nylon-6 chips, prices climbed due to rising cost and low inventory at polymerization makers despite amid modest buying interest. Offers for Taiwan-origin chips were pegged at US$2,500-2,520 a ton, up US$10 from last week as producers intended to raise the numbers. In China, bright conventional spinning nylon-6 chips, were priced at US$2,945-3,045 a ton, up US$60 from last week.

As cost increased nylon filament yarn makers remained under pressure and had to push prices up on maintain margins, although thin. They were also facing demand slackness as weaving sector was cautious due to lack of order intakes and tight liquidity. Market players held bearish sentiment towards demand in July, but hoped replenishing at low prices would improve. In China, semi-dull FDY70D/24F was traded at US$3.61-3.66 a kg, unchanged from previous week. FDY40D was pegged at US$3.90-3.98 a kg, rolling over from last week.

Courtesy: YnFx Weekly PriceWatch Report, Daily Textile Prices Service