Contradictory profit margins in benzene and styrene production chain has been seen in North West Europe, amid strong demand for benzene due to strong prompt demand for benzene supports prices, with backwardation in the benzene market steepening as a result; and deteriorating styrene market where economic weakness is denting demand, as per Platts. The naphtha-benzene spread widened to US$406.50/mt this week, dropping to its widest level since February 25, and the benzene-styrene spread has shrunk to US$180/mt - its lowest level since March 4. Styrene has been impacted by weak demand for consumer products, including plastics and packaging, since Q2, and demand has remained weak in August despite the imminent start of turnaround season. A raft of styrene units in Europe are scheduled to start maintenance from the end of August, which is expected to see the market tighten in September.
Last Wednesday saw August-delivery NWE benzene barges rise by over US$28/ton to cross the US$1300 mark, while styrene prices rose by a modest US$5.25/mt, to about US$1475/mt.
Market sources opine that benzene was being boosted by traders covering short positions as well as more fundamental factors, including the rally in crude oil prices this week. "The [benzene] market is like a compressed spring. It compressed lower once the pressure of crude was there but once it was released (after crude rebounded) it bounced higher than before. There is less product arriving due to the closed arbitrage and no imports. The Mediterranean is taking more product and [Amsterdam-Rotterdam-Antwerp] has dried up more than expected." The backwardation in the benzene market narrowed on Thursday, amid unconfirmed reports of production issues with some naphtha crackers in Europe were subsiding, and that as a result, the urgency for prompt benzene might be passing.