Demand for FOB Korea benzene holds firm on widening spread to DDP USG

Singapore — Liquidity in the Asian benzene market was healthy in the trading week ending April 1, as widening spread between FOB Korea and DDP USG prices propelled buying interest, with traders heard eyeing opportunity to move cargoes transpacific.

The value for May cargo has gained since the start of the week, rising to $866/mt April 1 from $821.50/mt March 29. In the floating market, May cargoes were seen last bid at a premium of $15/mt to the Weekly Mean of Platts Korea benchmark, up from March 29 bid of plus $7/mt.

In line with firmer demand for prompter-loading material, which can be shipped to the US while the spread is wide, the May/June backwardation ballooned to plus $29/mt April 1, from plus $15.50/mt March 29.

The consistent gain in benzene comes contrary to price movement in crude oil markets, which saw a dip March 31. As a result, sources were heard surprised by the strength in FOB Korea, adding that the commonly referenced relationship between fixed, floating, and paper pricing is not applicable at the moment, with inter-month spreads too volatile to define a sharp range for May floating values.

An East China trader also noted that with FOB Korea-CFR China spreads narrowing, it would be logical to redirect FOB Korea cargoes towards the US instead of China. However, demand for CFR China has been heard growing due to new start ups downstream, and falling inventory levels, which could compete for Asian supply in the coming weeks.

DDP USG reaches 39-month high

In the US, benzene prices rebounded to hit a near 39-month high March 31, with prompt spot values assessed at 320 cents/gal ($958/mt) on a DDP basis. Front month values were assessed at a 10-cent discount to the prompt month with multiple trades heard done at 310 cents/gal ($928/mt). In addition to higher spot prices, participants anticipated an uptick in the US April benzene contract with some sources expecting a settlement near 300 cents/gal ($898/mt), up from 268 cents ($802/mt) in March.

Participants pointed to favorable fundamentals, with demand improving from the downstream styrene segment and tightness on the supply side.

Styrene demand in the US has picked up as a number of producers have brought units back online following planned and unplanned outages. Sources have said that CosMar and LyondellBasell have restarted styrene production following planned maintenance. With a combined annual ethylbenzene, or EB, capacity of 2.772 million mt, the estimated benzene requirement would be just under 171,000 mt/month.

Styrolution restarted its EB unit at Bayport late in the week ended March 27, according to a filing.

In addition to increased demand, benzene production was curtailed by the sub-Arctic temperatures which blanketed the US Gulf Coast mid-February, taking a number of refineries and chemical producers offline.

Benzene exports out of the US further exacerbated tightness with a number of trading houses heard looking to move material to Northwest Europe. Shipbroker sources noted at least 20,000 mt slated to load in mid-March though it was not immediately clear how much was ultimately fixed.

FOB Korea-forward month FOB USG paper spread widens

June FOB USG paper, which is used as a proxy to forward-month DDP USG physical cargoes, was assessed at 310 cents/gal March 31, while FOB Korea stood at $863.33/mt, bringing the price spread between the two regions to $63.57/mt.

This is significantly higher from a month ago, with the same spread at minus $3.66/mt Feb. 26.

Spot freight has been heard expensive between Korea and US due to firm demand, at about $62/mt the week ending April 1. This is significantly higher than the 2020 average of $51-$55/mt.