Increased US Arbitrage Opportunities Helps Asia Benzene Firm

Increased US arbitrage opportunities helps Asia benzene firm

12-Jul-19

Benzene market in Asia remained firm with a potential increase in cargo movements to the US, as the arbitrage window widened on demand uptick in the West, as per ICIS News. The shutdown of Philadelphia Energy Solutions’ refinery in Pennsylvannia in H2-June after an explosion at a nearby unit stoked concerns of a tighter availability of cumene, which it supplies in good quantity to local users. The tighter supply of cumene could potentially curb exports or fuel an increase in domestic production from other cumene suppliers. In case of the latter, demand for benzene, the feedstock for cumene, could see increased demand.

With the US importing regularly from Asia countries like South Korea and Japan, demand for benzene in Asia should see continued support in the near term. This would also alleviate the supply overhang condition in Asia.

Spot benzene price scaled new heights in July, with the FOB (free on board) Korea market moving to US$680/ton for August cargoes. Meanwhile, the September US market topped US$2.50/gal this week, approximately US$750/ton, keeping the East-West arbitrage continually open since April. With its strong performance since the second half of June, the spread between benzene and its feedstock naphtha has improved in recent weeks, lifting profitability of benzene makers.

On the demand side, sentiment of buyers has improved since the G20 summit in Japan in late June, where a trade truce was announced between the US and China. Buying interest among Chinese users for import cargoes was rekindled in recent weeks, following the increase in domestic prices as well as the decline in shore tank stocks to under 200,000 tonnes. Buying impetus in Taiwan was also firm with users picking up several August lots. Firmer bids were also seen as buyers were in competition for cargoes that could be shipped to the US.

Meanwhile, the start-up of two new benzene facilities in southeast Asia with commercial products has been slated for the latter part of the third quarter.