The spread between Northwest European naphtha and benzene has fallen to its lowest level since April 2009, the clearest sign to date of the weak sentiment that is currently pressurizing the ARA market.
NWE benzene was assessed at a mid-point of $1,073/mt for 1,000 mt CIF ARA barges Tuesday, which compared with a European open spec naphtha assessment of $948/mt CIF NWE. This gives a spread of $125/mt.
Platts data shows that the last time the spread was lower than this was April 21, 2009, with a value of $116.25/mt. This reflected a market than was recovering from the crash in the final quarter of 2008, where excessive length in the European market saw the naphtha-benzene spread go into negative territory.
A slowdown in industry buying, partly caused by reduced production rates of downstream styrene monomer, has left Europe long for prompt product, which has pushed benzene price levels down.
One trader said that concerns over the wider economy were keeping buyers on the sidelines. "Everyone is very quiet and very cautious," the trader said.
A second source added that this had led to fundamental issues in the market. "There is quite a bit of material being nominated into this market and there are very few physical takers. That either means the market is very well supplied or the short players want to pretend their tanks are full."
"Either way it means that there is more pressure on the front month," the trader said.
Whether the spread could weaken further was debatable, and one industry source said the market was "quite bearish, but not like the end of the world."
The outlook for October looked bearish domestically with further styrene turnarounds planned to begin during the second half of September according to sources.
A possible outlet for European product could be the US Gulf Coast, although demand levels in that region were also unclear.
One trader said: "There's a certain chance the US [prices] will increase. There's some talk of cracker rates getting trimmed which could tighten up the market,although we won't see higher demand."
