The current strength of the Northwest European benzene market compared to FOB Korea pricing, could bring Asian imports, according to market sources Thursday evening.
The European market was seen trading between $1,292-1,295/mt for 1,000 mt CIF ARA February barges during the day and has been well supported through January.
This has been caused by a lack of benzene feedstock pyrolisis gasoline. The availability of pygas has been limited due to lower cracker operating rates and the cracking of lighter feeds such as propane which produce less pygas than alternative cracker feeds such as naphtha.
The European price compared to February FOB Korea price levels of $1,193/mt FOB Korea. Freight between the two regions was pegged between $90-94/mt for a 5,000 mt parcel, with a 10,000 mt cargo around $85/mt.
While this left the arbitrage only narrowly open there are already some in the European market suggesting product could come in from Asia.
One trader said the current price differentials between the regions were "close enough to keep an eye on" while a producer said that Asian product could help loosen up the market in Europe.
"The big relief could come from Asian imports. If the arb opens, Asia will export," the producer said.
He added that there was unlikely to be an improved supply picture in Europe from alternative options.
"You won't see any relief on supply from industry. And demand is firm and not changing, so you won't see any relief from that side too," the producer added.
The impact of imports would hit European price levels, according to some, with downstream demand not considered firm enough to absorb additional supply.
A second producer said: "There's been some talk that these prices are attracting Asian product and at that point the market here is over."
Others were doubtful that any product would come into Europe from Asia however.
One trader felt that with the March trading between $10-20/mt below February in NWE and with April valued below March, the potential of an open arb was "not that close."
The trader added: "You can argue over how sharp the March price levels are, but the overall message is that the arb is not open, or even that close to being open. If it was you'd would already see people lining up vessels."
A second trader supported these views and added that there were several other reasons why product would not come into Europe from Asia.
"Europe can't easily handle big imports," the trader said adding: "On top of the freight costs, you need a terminal big enough to receive the parcel and there are very few players willing to take such volumes on at present."
This view was supported by the fact that trade was still said to be holding product, while industry was reluctant to increase inventory levels and tie up cash in stocks.
The trader added that following increases of over $170/mt since the start of the year, there was also limited upside potential in Europe now to offer an additional incentive to anyone looking to ship product.
"Prices have reach a stage where there is maybe an extra $50-70/mt upwards potential [in NWE], which needs a big push," the trader said.
