US benzene import supply uncertain

OREANDA-NEWS. July 21, 2015. US benzene prices could draw support from lower reformer rates at refineries as the summer driving season ends. But incoming cargoes from Asia through November could keep material well supplied on the US Gulf coast.

Spot benzene prices rose modestly in the first quarter following the prior year's lows, from 215.5?/USG on 2 January to 285?/USG in April as supplies tightened amid strong styrene demand. Lower prices for benzene and strong demand for toluene for octane blending lowered conversion rates and lent temporary support to benzene pricing in the second quarter.

US benzene hit a 2015 low of 217.63?/USG on 27 May following an overnight flood in Houston, which resulted in the closure of the Houston Ship Channel. The weak prices spurred demand from European traders, however, and US prices rebounded swiftly.

Benzene saw greater pricing support in late June, when prices hit 306.5?/USG, the highest this year, on 24 June because of short-covering by a major market player. Yet steady imports tipped US benzene's forward curve into backwardation in June.

In the first week of July traders estimated 70,000t or more of benzene is due to arrive this month.

More imports from Asia are expected in September through November. However, traders' enthusiasm for purchasing benzene from Asia waned in the first week of July amid concerns of weakness in the Chinese economy.

Imports could be countered by lower production in the third quarter. Then, reformer run rates, which typically ramp up in preparation for and during driving season when gasoline demand is high, will begin to ease ahead of the off season and RVP switch. This will result in fewer aromatics produced and could tighten benzene supply. Meanwhile inventory levels today are lower than in April and May.

Yet during that same period benzene is poised to weaken from a decline in domestic demand. Buyers reduce purchases ahead of ad valorem taxes in August, when tanks are cleared to avoid extra inventory charges. A similar decline is normally seen in the fourth quarter, ahead of ad valorem tax season for other market players. That is when demand for styrene and derivatives like polystyrene, expandable polystyrene and acrylonitrile-butadiene-styrene also see a seasonal decline in purchasing.