CPC finalises benzene term purchases for 2020

Taiwan state-owned CPC has concluded its tender to buy benzene for delivery during January-December 2020.

CPC will buy four cargoes or 12,000t each month from two trading firms at premiums of $6-9/t to fob South Korea prices. By comparison, the producer had fixed its term purchase for 2019 at a premium of $5/t to fob South Korea prices.

The tender, which was issued on 4 November, sought 15,000-18,000 t/month of benzene. Offers were submitted by 12 November.

The results of CPC's annual term import tender typically set the tone for negotiations in the cfr China and fob Korea markets.

Market participants expected the tender to be concluded at premiums above $10/t to fob South Korea prices as recent spot deals were done at premiums of $20/t for November delivery and $14-15/t for December delivery.

Regional benzene supplies will fall in the coming year because of further operating rate cuts at paraxylene (PX) units.

In South Korea, Hanwha Total has trimmed production at its toluene disproportionation (TDP) unit by 6pc since mid-November. Margins to produce PX and styrene monomer (SM) have been negative. GS Caltex will also reduce operations at its TDP unit by 10pc from December. This follows moves by Japan's JXTG, South Korea's Lotte Chemical and Hyundai Cosmo Petrochemical — a joint venture between South Korea's Hyundai Oilbank and Japan's Cosmo Oil — to cut PX production earlier this year.

But these benzene supply cuts are being replaced by new production start-ups.

China's Hengyi Petrochemical has achieved on-specification benzene output at its Brunei plant and is actively seeking opportunities to sell on both a spot and term basis for the coming year.

The market expects China's Zhejiang Petrochemical (ZPC) to start producing benzene before the end of the year after the mega producer achieved PX production on 15 November. ZPC can produce 1.2mn t/yr of benzene at its reformer and 280,000 t/yr of benzene at its naphtha cracker.

Malaysia's 300,000 b/d Rapid refinery in Pengerang, Johor state, has yet to reach on-specification aromatics production. The refinery is working towards stabilising its benzene output.

But prices of benzene derivatives have been falling to multi-year lows, squeezing production margins ahead of the start-up of a large wave of new capacity. Further price drops are expected once China brings on line almost 2mn t/yr of new SM capacity in the coming months.

Japan's Taiyo Oil and Hanwha Total have already reduced their SM operating rates, in response to production losses. Further SM production cuts are expected in the new year, likely reducing benzene demand.

By Kate Lee