US spot benzene on Thursday was talked in the market at around 330 cents/gal FOB USG for October -- up 2 cents/gal from Wednesday's low for 2011 of 328 cents/gal -- even though multiple benzene production profitability indicators were poor, said sources.
Sources said the modest strength in the spot price was due to sentiment in the industry that Wednesday's price was the floor, as well as higher NYMEX crude futures. November NYMEX crude futures settled up $0.93/barrel Thursday to $82.14/barrel.
"I don't see how much lower we could go [than Wednesday's price]," a veteran aromatics trader said.
Wednesday's assessment was the lowest in the US since November 24, 2010, when Platts data showed it at 325 cents/gal FOB USG.
By the end of the market-on-close assessment window Thursday, October spot benzene offers moved down to 333 cents/gal DDP USG after opening the day at 337 cents/gal DDP USG. October bids opened at 323 cents/gal FOB USG and rose to 327 cents/gal by the end of the MOC. No trades were reported.
Although benzene prices were rebounding, several production profitability indicators showed production margins were being squeezed.
Chief among the indicators was the toluene-to-benzene differential, which sources said was a good analytical measure for benzene production profitability, since toluene is used as a feedstock to produce benzene in processes including hydrodealkylation (HDA), toluene disproportionation (TDP) and Mobil selective toluene disproportionation (MSTDP).
Toluene was pegged by sources at 339 cents/gal FOB USG for October, flat to Wednesday, yielding a toluene-to-benzene differential of minus-9 cents/gal.
While this differential was better than Wednesday's value of minus-11 cents/gal, the fact that it was in negative territory was said to be an indication that benzene production profitability was not good, as sources said a positive differential indicates healthier margins.
Considering that mixed xylene was talked in the market at 420 cents/gal FOB USG for October, a toluene producer asked rhetorically: "How often do we see benzene as they cheapest of the aromatics?"
The HDA, TDP, and MSTDP processes all use toluene as a feedstock to produce benzene.
The HDA process produces only benzene. The TDP process produces benzene and mixed xylene, and the MSTDP process produces benzene, mixed xylene, and paraxylene.
HDA margins Wednesday were calculated by Platts at minus-$111.20/mt, the lowest since May 11, when they were at minus-$115.66/mt. TDP and MSTDP margins both fell Wednesday to levels not seen since September 8, with TDP margins at $96.54/mt and MSTDP margins at $202.21/mt.
Sources said the reason TDP and MSTDP margins did not fall further was due to the production of mixed xylene and paraxylene in these processes, as MX and PX prices were said to be providing limited support.
In addition, in relation to crude oil, benzene prices have decreased in value, as the benzene-to-crude ratio was pegged at 1.687, down from 1.6922 Wednesday.
The benzene-to-crude ratio has remained below the 1.7 level since Tuesday. Market participants have said recently that the industry considers 1.65 as a more appropriate ratio for the true value of benzene in relation to crude.
"I wouldn't say benzene is undervalued yet, but it's definitely getting closer," a benzene producer said.
