FOB Korea benzene on Friday was assessed higher by $28.33/mt week on week, and up $14.33/mt day on day at $588.33/mt, as firm buying interest from Chinese buyers led traders to actively seek cargoes for loading across second-half February, March and April from South Korea. CFR China prices had risen earlier in the week, and CFR China was assessed higher by $18/mt week on week, and up $1.50/mt from Thursday at $604/mt. The uptrend in FOB Korea had earlier lagged the rise in CFR China, and the CFR China-FOB Korea spread peaked Thursday at $28.50/mt, but as FOB Korea prices caught up Friday, the spread narrowed to $15.67/mt. While the spread was insufficient to cover freight rates between South Korea and China heard at $21-$23/ mt for a 5,000 mt benzene parcel, market participants were heard optimistic that the arbitrage would re-open as discussions for March delivery picked up. Amid bullish sentiment in the market, major Chinese benzene producer China Petroleum & Chemical Corporation, or Sinopec increased its domestic ex-tank price by Yuan 100/mt, a company source said Friday. The listed price for domestic East China benzene was increased to Yuan 4,750/mt from Yuan 4,650/mt. The new listed price equates to approximately $598.96/mt on an import parity basis, based on an exchange rate of 6.7025. The upward price revision is a move that a market source noted was “long overdue,” as prices both in the domestic East China market and in CFR China had risen steadily over the month in January. Preliminary statistics on South Korea’s export volume showed that the country exported 208,932 mt in January, down 83,332 mt from December, and down 25,153 mt on the year. This reflects thinner demand for South Korean cargoes from the US and Taiwan, which are the second and third largest buyer, respectively, of South Korean benzene based on 2018 statistics. Exports to the US in January were just 18.4% of total exports, down from the 2018 average of 24.8%. Exports to Taiwan in January were just 10.0% of total exports, down from the 2018 average of 19.8%. While market sources cited a possible recovery in demand from the US market amid upcoming turnarounds at aromatics units there, others noted that demand from the US for North Asian material could be limited amid ample supply from South Asia. Rationale FOB Korea benzene was assessed higher by $14.33/mt day on day at $588.33/mt Friday. The marker rolled forward Friday to take the average of the third, fourth and fifth half-month laycans, H1 March, H2 March, and H1 April. During the Market on Close assessment process, there were no transparent bids and offers seen. The H1 and H2 March laycans were assessed at $586/mt FOB Korea, below an offer last seen at $593/mt FOB Korea, widening the March/April timespread to minus $7/mt, below an offer seen at minus $6/mt. The H1 April laycan was assessed at $593/mt FOB Korea, above a bid last seen at $592/mt FOB Korea. The CFR China marker was assessed at the pegged level of $604/mt, up $1.50/mt day on day, above a bid for March seen at $603/mt. The East China marker was assessed at Yuan 4,877/mt, up Yuan 17/mt day on day, or $614.42/mt on an import parity basis.
Benzene Price in India
Asian ethylene continued firming Friday, rising $10/mt day on day, buoyed by healthy spot demand in China ahead of the Lunar New Year holidays next week. On a week on week basis, spot prices rose $45/mt. Participants were completing last minute buying in the spot market this week, driven by firm demand from the styrene monomer sector where margins have been positive. This week, the Asian styrene monomer margin was hovering above $100/mt, in line with firmer spot styrene prices, according to data. Market sources said spot demand also emerged in China for ethylene-oxide following the recent EO capacity expansion there. Asian monoethylene glycol margins have been hovering at around minus $150-$180/mt this week, data showed. Looking forward, market sources said it was unclear if Asian ethylene would continue rising as margins for most ethylene derivatives were currently negative. Asian polyethylene ethylene margin was calculated at minus $45/mt Friday, much lower than a typical breakeven spread of plus $150/mt, according to data. Some market sources said integrated producers would start considering selling spot ethylene cargoes, reducing their downstream plant runs amid positive ethylene margins. The recent strength in Asian ethylene pushed up the ethylene-naphtha spread above $570/mt this week, the highest level since September 2018, data showed. The spread is higher than a breakeven spread of $350/mt. Rationale Spot prices rose $10/mt day on day to be assessed at $1,085/mt CFR Northeast Asia and $985/mt CFR Southeast Asia Friday. The tradable level was in the high-$1,000s/mt CFR Northeast Asia and high-$900s/ mt CFR Southeast Asia Friday. Rationale CFR China MEG price was assessed flat day on day at $625/mt on Friday for 15-30 days forward cargoes, reflecting a trade discussion heard at this level, and below an offer heard at $630/mt. China domestic price was assessed flat at Yuan 5,100/mt over the same period, reflecting tradable discussions heard at this level. CFR Southeast Asia MEG was assessed up $7/mt week on week at $630/mt on Friday, for 15-30 days forward cargoes, amid thin trade discussions, $5/mt higher than the CFR China marker.
Phenol prices went down Rs 3/kg to Rs 92-93/kg week on week at Kandla port on high inventory level and slow demand in the domestic market.
Booking level of phenol went down $30/mt to $1230-1240/mt week on week.
Prices expected more soften in coming days on bearish demand in major trading hubs of India.
International Market Updates:
CFR China phenol was assessed down $145/mt on the week at $1,175/mt Friday, above buy indications heard at below $1,000/mt, and at tradeable indications heard at $1,150-1,175/mt CFR China. End-users hailed the price drop as “overdue”, citing earlier price gains as having happened too quickly, and at too large a magnitude. Producers and end-users alike said Friday that prices of phenol is expected to continue falling moving forward, but market expectations differed on the impact of restocking activity for the Lunar New Year. A producer said Friday that CFR China prices would likely rebound closer to the festive season, while end-users said that prices would may stabilize below $1,000/mt CFR China. Despite the plunge in phenol, falls in feedstock benzene since October have left prices at a two-year low earlier this week. Market sources said that the price spread between benzene and phenol were still too high, and with benzene market long, it was likely that phenol prices would fall. Weakness in the downstream bisphenol-A has resulted in lower operating rates at BPA production plants, thereby affecting demand for phenol. Bisphenol-A is an intermediate material in the production of polycarbonate, which was heard at levels of $1,800-1,900/mt CFR China. “The price spread between polycarbonate and phenol is just $600-700/mt,” an end-user said Friday, adding that the narrow price spreads made it difficult for production plants to breakeven. CFR India phenol was assessed down $100/mt on the week at $1,240/mt, where a deal was heard concluded.
Benzene prices noticed stable to higher in the last couple of days which makes the market more stable and other chemicals prices also expected stable to the uptrend in coming days.
Benzene prices assessed around $710/mt CFR India.
Downstream aromatics prices noticed stable in Indian market on a day to day trading.
Toluene prices noticed at Rs 58000/mt at Ex-Kandla, Mix xylene noticed around 62000/mt Ex-Mumbai and styrene prices traded at Rs 87000/mt on Tuesday.
Asian benzene was assessed stable to higher from Monday despite the fall in upstream crude oil. The FOB Korea marker was assessed at $680/mt Tuesday, up$1.67/mt from Monday, while the CFR China marker was assessed flat at$713.50/mt Tuesday.
In the FOB Korea market, strong buying interests were heard for January cargoes while there were more offers heard for H2 December cargoes, however, no deals were heard concluded.
At 4:30 pm Singapore time(0830 GMT), ICE January Brent crude futures were down 48 cents/b (0.709%) from Monday’s settle at $67.21/b, while the NYMEX December light sweet crude contract fell 19 cents/b (0.331%) to $57.14/b.
In the East China domestic market, the benzene prices marker was assessed at Yuan 5,863/mt, up Yuan 10/mt from Monday. According to market sources, benzene inventories in China were recorded at 149,000 mt Tuesday, 13,000 mt higher on the week. As compared to the same period last year, inventories increased 3,000 mt.
The SM-benzene spread is flat from Monday at the 17-month low of $344/mt Tuesday, S&P Global CSG data showed. Elsewhere, in the US market, US November DDP spot benzene price was assessed up 4 cents on the day at 213.50 cents/gal DDP, down 34cents on the day, amid increased December activity.
RATIONALE: FOB Korea benzene was assessed up to $1.67/mt from Monday at $680/mt Tuesday. The marker currently takes the average of the third, fourth and fifth half-month laycans, H2 December, H1 January and H2 January.
During the CSG Market on Close assessment process on Tuesday, there were no transparent bids and offers seen.
The H2 December laycan was assessed at $670/mt FOB Korea, below the best offer heard at $671/mt with no bids heard. H1 and H2 January laycans were assessed at $685/mt, above the best bid heard at $684/mt with no offers heard.
The CFR China marker was assessed flat from Monday at $713.50/mt Tuesday, above the buying indication heard at $690/mt. The East China marker was assessed at Yuan 5,863/mt, with its import parity equivalent assessed at $715.65/mt.
FOB Korea benzene inched lower by $1.33/mt week on week to $874.67/mt Friday, despite a notable increase in inquiries from buyers in China and Taiwan. The bearishness in the market over the week leading up to Friday was largely due to weakness in upstream crude oil, with ICE October Brent crude futures falling $1.49/b week on week to be assessed at $71.74/b at 0830 GMT Friday.
The downtrend in global benzene prices also dampened sentiment, with October FOB USG paper down 2 cents/gal week on week at 298 cents/gal Thursday, or $891.02/mt. Benzene CIF ARA was assessed lower by $7/mt over the same period to $862/mt Thursday.
With price spreads between the US and EU against Asia at $16.35/mt and minus $12.67/mt respectively, the arbitrage from Asia to these regions was closed Friday. Despite weak spot demand from US and EU, demand from China was heard strong this week, with trades for September-arrival benzene heard last concluded at $885/mt CFR China.
Weakening Chinese Yuan
Sellers in the market noted that Chinese end-users were keen to receive September cargoes earlier in the month, in a move contrary to the situation in first-half 2018. The pickup in demand from China was a welcome move, as end-users were earlier heard mulling a weakening Chinese yuan currency, amid ongoing exchange
rate volatility as the US-China trade war continues.
The yuan/US dollar exchange rate stood at 6.8395 Friday, up slightly from 6.8322 last Friday. Strength in East China’s domestic prices resulted in a narrowing price spread between domestic cargoes and import cargoes. Prompt cargoes were assessed higher by Yuan 140/mt week on the at Yuan 7,130/mt Friday, or $881.06/mt on an import parity basis, while balance-August cargoes were higher by Yuan 120/mt over the same period at Yuan 7,160/mt ($884.77/mt).
September domestic cargoes rose Yuan 120/mt week on week to Yuan 7,190/mt ($888.48/mt). Import cargoes on a CFR China basis were assessed higher by $9/mt week on week at $892/mt Friday. Over in the Southeast Asia market, a FOB Southeast Asia tender for any September-loading was heard to have been awarded at a discount of $16-$19/mt to the benchmark FOB Korea marker.
China announces 25% tariff on US-origin benzene
However, with demand from China improving, sellers in the Southeast Asian region were heard expecting sell tenders to be awarded at a smaller discount to FOB Korea moving forward. Amid an escalation of the US-China trade war, a notice by China’s Ministry of Commerce released late Wednesday announced a 25% tariff, effective August 23, on US-origin benzene heading toward China.
Included in the list was phenol and acetone, downstream products of benzene. However, the tariff was expected to have little effect on the supply of benzene to China, as the country imports little from the US. In 2017, China imported just 24,411 mt of benzene from the US, which accounted for 0.98% of total imports in 2017.