Benzene-naphtha spread hits 8 month high in Asia amid strong global benzene market

22-Jan-14

The spread between benzene and feedstock naphtha in Asia widened to an eight-month high of US$442.63/mt on Friday, as soaring benzene prices in the US has opened up arbitrage opportunities and supported the Asian market, as per Platts. Platts assessed benzene at US$1364/mt FOB Korea, down US$2.50/mt day on day, while naphtha finished US$7.21/mt lower at US$921.38/mt CFR Japan. The last time the Asian benzene-naphtha spread was wider was on May 23, 2013, when it stood at US$444.63/mt. Asian benzene producers typically need a spread of US$150/mt over naphtha to break even. On January 15, US spot benzene reached a record high for a second consecutive trading session at US$5.53/gal (US$1655.13/mt) FOB US Gulf Coast, as inventories remained low and market participants were looking to cover short positions, as per sources. A day later, the European spot price of benzene surged to a high of US$1532.50/mt CIF ARA, the highest level recorded by Platts since it started assessing European benzene in May 2004. Although Asian benzene prices have not risen at a similar pace as in the US and Europe, the FOB Korea benchmark hit a 10-month high of US$1368.50/mt FOB Korea on January 15. Based on Friday's closing prices, the arbitrage window for sending cargoes from Asia to the US opened up further. Asian benzene was assessed at US$1364/mt FOB Korea while US benzene closed at 542 cents/gal (US$1620.60/mt) FOB US Gulf -- putting the spread between the two regions at US$256.60/mt on Friday, significantly higher than the US$68-73/mt freight cost required to send 10,000 mt cargoes parcels from South Korea to the US Gulf. A market source based in Asia said Monday that the amount of benzene exported by South Korea to the US so far in January is more than 33,000 mt. This is up 38% from South Korea's exports to the US in December, which stood at 23,871 mt, according to South Korean customs data.