MOSCOW (MRC) -- The US spot benzene market has been under tremendous pressure over the last two months as energy prices sank and derivative demand disappeared for many segments as COVID-19 forced lockdowns in North America, said Chemweek.
After being dragged down by a confluence of factors, prices may have begun to stage a rebound that could be sustained for the next few months. In April and May, refineries in North America opted to run their reformers harder than other units within the refinery, while lowering operations at their crude distillation units and fluid catalytic crackers to roughly 70%, according to data from the US Energy Information Administration (EIA). As a result, aromatics extraction units maintained operating rates of 80% and above despite downstream styrene, cyclohexane, and methylene di-para-phenylene isocyanate (MDI) plants curtailing their rates due to poor demand.
Even with prices sinking in the US, a worldwide glut of benzene inspired a flood of imports to the US Gulf Coast (USGC) in April that arrived in May. By the end of May, benzene was trading at a discount to RBOB gasoline, something that has not happened since March 2009.
Unable to work cargoes into the depressed US market, producers in Asia sent benzene to China instead.
In May, Korea loaded less than 25,000 metric tonnes of benzene to send to the USGC and in the first 10 days of June there was no loading for the USGC. The last time South Korea did not load benzene during the first 10 days of the month loading window was in January 2019. The USGC is expected to see record-low benzene imports from Asia over the next three to four months.
Market sources agree that the key indicator being watched this month is the operating rate at downstream plants in the US that consume benzene. One styrene unit is restarting by the end of this month and propylene oxide-styrene monomer (POSM) plant rates are also increasing.
Styrene has been reportedly sold out through July, but if North America producers can’t export because customers in Asia stop buying it, plants in the US could lower rates again, limiting benzene’s rebound.
As MRC informed earlier, Russia's production of benzene was 110,000 tonnes in April 2020, compared to 133,000 tonnes a month earlier. Overall output of this product reached 505,000 tonnes over the stated period, up by 1.7% year on year.
Benzene is a feedstock for the production of styrene monomer (SM), which, in its turn, is a feedstock for manufacturing polystyrene (PS).
According to MRC's ScanPlast report, April estimated consumption of PS and styrene plastics in Russia was 36,170 tonnes, down by 12% year on year. Russia's estimated consumption of PS and styrene plastics totalled 157,110 tonnes in January-April 2020, down by 5% year on year.