Northwest European benzene prices tumbled by over $30/mt Thursday morning as the market reacted to a sharp fall in the US Gulf Coast market, sources said.
FOB US Gulf Coast values fell by 11.5 cents per gallon ($34/mt) to 316 cents/gal ($945/mt) for October and 318 cents/gal ($951/mt) for November Wednesday, forcing first Asia and then Europe to drop by similar amounts.
After closing at an assessed level of $915/mt Wednesday European sources reported October bids dropping well below $900/mt at $880/mt for 1,000 mt CIF ARA barges, while sellers were at $920/mt.
The true extent of the fall in value was seen in the November market, where sources reported offers down by $15/mt to $950/mt, although buyers were much further back at $930/mt sources said.
Despite the initial offer levels two November trades were heard done at $930/mt, a dip of $35/mt compared to the previous days assessed value for November.
By midday, November had stabilized at a range of $930-945/mt, while there was some talk of a bid at $935/mt. October was seen at $890-910/mt sources said.
The fall in European values was a direct reaction to the US drop, according to traders, while the US fall was caused in part by a raft of imports headed from Europe to the US.
Up to 35,000 mt is believed to be moving between ARA and the USGC for November arrival, even though the arbitrage between the regions has remained closed in recent weeks.
One source said that a lack of demand for benzene in US meant that imports were always going to put downwards pressure on global prices.
"I wonder why players were surprised about the price drop due to huge import cargoes out of Europe," the trader said. "The 'problem' is not solved by putting it from the right pocket to the left," he added.
A second trader remarked that Europe would continue to be bearish as even with exports to the US, the local market was still long for benzene. "Prices will keep going down. There's tons of benzene about. It's just so long, it won't recover until January [2012]," the trader added.
Despite the bearish mood of many sources, November benzene prices were actually solid in relation to upstream naphtha, which was under pressure from a fall in crude futures.
European open spec naphtha was valued around $886.50/mt CIF NWE for November, Thursday midday, giving a spread of $43.50/mt compared to the November benzene trades.
The spread closed at an assessed level of $34.50/mt October 19.
