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.