The US benzene forward curve remains bullish going into the first quarter of 2019 amid fewer imports from South Korea and lower domestic supply because of early-year US refinery turnarounds.
Despite US benzene hitting a nearly three-year low on 10 December at 184¢/USG on lower crude prices, many US participants retain a flat to bullish outlook with expectations of lower inventories at the end of this year.
Argus estimates that US benzene inventories grew during October and November since the American Fuel and Petrochemical Manufacturers (AFPM) association released its third quarter report. Higher-than-expected imports in October of 151,000t and lower consumption because of two scheduled turnarounds at a cumene and aniline faciltiy contributed to the inventory buildup.
Argus expects inventories to draw down during November and December but remain above the 100mn bl level, still indicative of flush supplies.
November spot fixed cargoes from South Korea to the US were estimated at 20,000t. Assuming a two-month laycan, those November cargoes are due for arrival in January. This is a considerable decline in spot fixed cargoes from South Korea, compared with the monthly import average of 67,000t from January to October 2018.
The lower import expectation coupled with the high cost of rolling benzene forward into January to circumvent ad valorem taxes has supported a wide 9.5¢/USG premium of January over December volumes. In addition, recent reductions in global PX prices and higher toluene prices domestically will reduce margins at selective toluene disproportionation (STDP) units in the US. This will cause lower co-product benzene output in both December and January.
On the domestic supply side, refinery operating rates held in the mid-90pc level for most of the fourth quarter, allowing for reformers to run harder and produce more gasoline that the US continues to export at record levels. Consequently, this is adding more byproduct benzene to the market. Several US Gulf coast refineries will begin seasonal planned turnarounds in the first quarter, which will reduce supplies of reformate-based benzene supply.
On the demand side, one 660,000 t/yr ethylbenzene (EB) unit went off line last week on the US Gulf coast and was scheduled for restart in mid-December. Additionally, a second 990,000 t/yr EB unit with operational issues in the last two weeks was last heard operational again.
Finally, a third 549,000 t/yr styrene producer was heard running hard to build inventory ahead of a scheduled turnaround in late January through early March. US styrene producers were bullish going into the first quarter as Turkey, India, South Korea and Taiwan pull US styrene to build inventories prior to their own turnarounds in the second quarter.
Participants anticipate strong demand for styrene, which constitutes roughly half of benzene consumption in the US and will hasten the balancing of flush benzene inventories.
