Mixed views on impact of high inventories in China.

A lack of clarity continued to shroud the Asian benzene market Friday as dwindling demand continued to widen the spread between March and April. The H1 March/H2 March and H2 March/April spreads had been volatile since laycan declarations for March cargoes concluded Friday. The H1 March/H2 March spread stood at minus $5/mt Friday, from minus $7/mt Friday. H2 March/April was valued at minus $11/mt Friday, from minus $7.50/mt Friday. A trader noted that the Asian benzene market had been in a persistent contango for “quite some time,” as the market is structurally long while producers seek outlets beyond Asia in the US and Europe. Buying from China, the key demand center within Asia, had come to a standstill Friday, amid high inventories and a volatile yuan currency relative to the US dollar. Market sources said that East China inventory levels, defined as the sum of benzene, toluene, xylene, styrene and monoethylene glycol stocks, had hit an all-time high of more than 3 million mt. As a result, traders were heard not keen to import cargoes. Furthermore, several traders were heard turning away from the CFR China market to the FOB Korea market to sell April cargoes. A trader likened growing East China inventory to a “bubble,” with prices bound to fall quickly should bearish fundamentals arise. On the other hand, another source said that it was unlikely to occur in the benzene market, with benzene prices “still quite low,” while CFR China prices were more than sufficient to account for freight between South Korea and East China. CFR China was assessed at $611/mt Friday, $15/mt above the FOB Korea benchmark, which stood at $596/mt.

RATIONALE:

FOB Korea benzene was assessed higher by $3.83/mt on the day at $596/mt Friday. The marker takes the average of the third, fourth and fifth half-month laycans, currently H1 March, H2 March and H1 April. During the CSG Market on Close assessment process, there were no transparent bids and offers seen. The H1 March laycan was assessed at $589/mt FOB Korea, above a bid last seen at $588/mt FOB Korea. The H2 March laycan was assessed at $594/mt FOB Korea, below an offer last seen at $595/mt FOB Korea, and above a bid at $590/mt. The H1 April laycan was assessed at $605/mt FOB Korea, above a bid last seen at $604/mt. The CFR China marker was assessed higher by $3/mt day on day at $611/mt, above buy indications heard for March and April at $610/mt CFR China. The East China marker was assessed at Yuan 4,873/mt Friday, up Yuan 3/mt day on day, or $607.99/mt on an import parity basis.

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