Spot Northwest European benzene prices were climbing Thursday morning although there were signs of bearish sentiment creeping in among some sources. Price levels dropped Wednesday, with August trade heard done at $1,280/mt and $1,275/mt for 1,000 metric ton CIF ARA barges and September changing hands at $1,250/mt.
But the market bounced back by as much as $25/mt Thursday morning, with August bid levels rising to $1,290/mt at the start of the day, while there were reports of trade done at $1,300/mt. September was also stronger, with the market moving to a $1,265-1,285/mt bid-offer range, with trade done at $1,275/mt sources said.
The price increase was attributed to a combination of firmer upstream, with European open spec naphtha up around $20 to $967/mt CIF NWE at midday on the back of overnight gains in crude and a solid downstream with styrene monomer prices climbing to year high price levels Thursday.
One industry source said these factors were offsetting weakening fundamentals in the benzene market, and that there was room for a fall going forward. The source said prices "are currently still on the high side" with "more potential for the market to fall."
The market has weakened relative to naphtha during August, sliding from a premium of $470.75/mt July 31 to $318.75/mt at the close Wednesday. In addition, the backwardation between August and September prices has slowly narrowed from $82/mt July 31 to $25/mt at close Wednesday suggesting that supply at the front of the market is improving.
"All major plants" are now running without issue according to the industry source. Combined with this is the fact that NWE steam crackers have begun to crack more naphtha following a reduction in the spread between LPG's such as propane to naphtha.
The source also noted that despite the increase in styrene prices, operating rates at styrene units in NWE are low, limiting benzene demand. All this could see the market become "balanced to long" going into September the source said.
His view was supported by a producer, who also felt that the market was now in a period of downturn.
"We've had our tightest periods with high prices and now I think we'll come down. This week, crude is up but the US is down and Europe hasn't been able to move up with it," the producer said.
These views were not widespread however, with some sources saying there was still potential for benzene, mostly because of the improving styrene situation. There are those who feel that as styrene economics improve it will lead to a rise in benzene consumption.
High benzene prices from May onwards had put pressure on styrene margins, and styrene facilities in Europe had been operating at technical minimum levels of 65-70% capacity from July. One trader said that now styrene margins are improving, production rates will rise.
"Ethyl benzene/styrene monomer sites will start consuming more benzene. Rates will certainly increase," the trader said, noting that the European market will also not receive imports during August and September. The trader added: "So long as styrene moves up, benzene can only follow." A benzene producer shared this view and said: "Styrene demand has been stable at minimum levels. If demand rises then we have to see increased consumption of benzene."
This was not enough to sway the view of those of a more bearish outlook however. One source said that "downstream demand is not actually good" adding that the styrene price is "more about low production than increased demand." A benzene producer said benzene fundamentals would still be too strong to be ignored. "I believe that the increase in benzene production has more capability of making the market longer than demand has the capability of pushing it up."
