US benzene spot prices tumbled swiftly this week after hitting a record $5.35/gal ($1,599.65/mt) DDP US Gulf on Friday, Platts data showed.
On Tuesday, October benzene was assessed at $5.18/gal ($1,548.82/mt) DDP, down 9 cents/gal ($26.91/mt) from Monday, while November benzene was assessed at $4.55/gal ($1,360.45/mt) DDP, down 25 cents/gal ($74.75/mt).
Weakness in the energy complex contributed to the bearish aromatics market. NYMEX December crude futures settled $1.98/b lower to settle at $86.67/b. ICE Brent futures for December delivery fell $1.19/b to settle at $108.25/b on economic concerns triggered by the selloff of Spanish bonds after the Bank of Spain said the country's economy contracted in the third quarter.
The backwardation between October and November benzene on a DDP basis steepened to a record 63 cents/gal ($188/mt), up from 47 cents/gal ($141/mt) Monday. November benzene was falling rapidly on expectation that delayed Asian imports, due in second-half October, will start arriving and the supply tightness would ease.
For first-half November, the bid/offer range was heard at $4.50-4.95/gal ($1,345.50-1,489.02/mt) DDP. Offers remained at similar levels to Monday, but bids retreated as buyers turned cautious.
Industry sources said the falling benzene spot price was partly due to concerns from downstream markets. With benzene at above $5/gal ($1,495/mt), styrene and polystyrene producers had to raise prices to cover increasing costs.
"To stop benzene from rising further, we can cut operations rates and sell off the benzene, and just use up our feedstock contract volume until November," a styrene producer said.
Styrene producers have seen their margins eroded by high feedstock costs. Production costs were estimated as high as near 74.65 cents/lb ($1,645.73/mt) based on spot benzene and ethylene, according to Platts data. The benzene spot price average from October 1-23 was $4.78/gal ($1,429.22/mt), compared with $4.36/gal ($1,303.64/mt) in September, an increase of 42 cents/gal ($125.58/mt) or 9.6%.
Styrene was assessed Tuesday at 71.25 cents/lb ($1,570.77/mt) FOB USG, down 0.4 cents/lb ($8.82/mt) from Monday.
US-based Americas Styrenics was planning to raise its polystyrene domestic contract price for November by 7 cents/lb ($154.28/mt) on a delivered basis, a company source said. Styrolution was implementing a 5-cent ($110.23/mt) increase for November as well, according to a letter sent to customers. The concern about higher polystyrene prices is that end users could switch to cheaper plastics such as polypropylene or polyethylene.
General purpose polystyrene was last assessed at $1.02/lb ($2,248.69/mt) delivered railcar October 17 and high-impact polystyrene was assessed at $1.14/lb ($2,513.24/mt) delivered railcar, while PP injection grade was assessed at $1,389/mt FAS Houston and LDPE assessed at $1,488/mt FAS Houston.
