Traders eye deepsea arbitrage for benzene as CFR China prices remain highest globally

Singapore — International traders are seeking opportunities to shift supply of deepsea origin into Asia as CFR China benzene prices stand highest globally on improving demand within the country.

The intra-city trade is gradually returning to normal in China, following the lifting of coronavirus lockdowns.

S&P Global Platts on Monday assessed CFR China benzene at $322/mt. On the other hand, prices at other key demand centers globally were lower with CIF ARA assessed at $230.50/mt and May DDP USG assessed at 70 cents/gal, or $209.30/mt.

Benzene of European origin is expected to make its way into Asia, with earliest parcels heard loading in H2 April, for arrival in June in the Asian market.

On the other hand, market participants in Asia said that despite an open arbitrage on paper, with a 20% import tax on cargoes of US-origin, it was "impossible" for the movement of benzene from US to China.

FIRM DOMESTIC EAST CHINA PRICES

The domestic East China price rose highest on strong support from traders within the market since the lifting of lockdowns, prompting hopes of a recovery in demand for finished products.

The domestic East China marker was assessed at Yuan 3,087/mt, or $378.77/mt, on an import parity basis, in turn boosting demand for CFR China material.

With CFR China assessed at $322/mt Monday, this represents a potential $56.77/mt profit for cargo imported and subsequently resold in the domestic market. This will still be an attractive profit after taking into consideration storage costs.

However, the only issue was insufficient storage, as movement downstream remained slow.

Traders in the domestic East China market identified the spread as "abnormal."

Furthermore, traders touted the high prices in China as a result of speculative trading, while offtake from end-users remained slow, resulting in a build up in stock at commercial tanks in Jiangyin and Changzhou.

Platts had earlier reported that end-user requirements were heard fully met by term supply, resulting in no further need to seek spot material.

EUROPE-CHINA ARBITRAGE

With end-user demand slow, and an onslaught of supply from Southeast Asia, Northeast Asia, and Europe, market participants were heard concerned about a potential oversupply on a CFR China and domestic East China basis. This could push prices lower, effectively shutting the deepsea arbitrage.

Logistical difficulties were also heard regarding securing sufficient volumes, of at least 5,000-10,000 mt, to work the Europe-Asia haul, in order to obtain a workable freight rate.