Cracker outages in Europe to have mixed impact on Asian petrochemical market

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Singapore — Recent cracker outages in Europe resulted in an uptick in European prices of benzene and styrene, which market sources said Tuesday could have some effect on trade flows and prices in Asia.

Market sources said Dow Chemical shut down its steam cracker in Boehlen, Germany, due to some problems. The steam cracker is able to produce 560,000 /year of ethylene, 310,000 /year of propylene and 104,000 /year of . The aromatics unit adjacent to the cracker has an annual benzene capacity of 320,000 /year.

The company was not immediately available for comment Tuesday.

CIF ARA benzene had risen $25/mt on the day to $656/mt Monday, while FOB ARA styrene climbed $21.50/mt over the same period to $1,032.50/mt.

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TIGHTENING EU SUPPLY COULD INCREASE DEMAND FOR FOB KOREA BENZENE

Market sources in Asia said Tuesday that rising benzene prices in the EU could close the spot benzene arbitrage between the EU and the US, resulting in greater demand from the US for Asian benzene.

The US imported 650,182 mt (24.8%) of benzene in 2018, according to data from Customs and Trade Development Institute, with peak demand seen over the summer season.

While a pick up in demand for FOB Korea benzene from the US was yet to be seen, a trader said Tuesday that the prices could increase amid tightening supply in the global benzene market.

Furthermore, demand from Asia’s biggest buyer, , was heard soft, owing to high inventory pressure and a weak domestic market.

This could reopen the spot arbitrage between and the US. However, the price difference between May FOB USG paper and FOB Korea prices stood at $16.88/mt Monday, insufficient to cover freight costs of approximately $50-$55/mt between the two regions.

LIMITED IMPACT EXPECTED ON ASIA ETHYLENE, STYRENE PRICES

Europe sells olefins — especially ethylene and butadiene — to Asia. Last year, China imported around 190,000 mt of ethylene from Europe, according to Chinese customs data.

“Europe is ethylene long. Even if Dow’s steam cracker is down, there will be some other companies available to sell ethylene,” said a market source.

Interestingly, spot ethylene prices in Europe weakened after the shutdown news. On Monday, the CIF Northwest Europe ethylene price fell $5/mt from last Friday to be assessed at $976.50/mt, according to S&P Global Platts data. The CFR Northeast Asia ethylene price dropped by $20/mt to $1,130/mt during the same period.

The cracker outages in Europe would likely have limited impact on Asian styrene as the current high styrene inventory in East China could impact imports for more than a month, said market sources.

Further, styrene plants in China have been running at relatively high operating rates, which are unlikely to be reduced in the , sources said.

With Asia being physically long and the arbitrage shut at the moment, it will be difficult to see any further support for Asian styrene prices at the moment, said an Asian trader.

Sources further added that European cargoes that have yet to be loaded will arrive in Asia late- onwards. Supply in Asia will be more stable during that period following the conclusion of plant maintenances concentrated over March to .

— Tess Tseng, tess.tseng@spglobal.com

— Regina Sher, regina.sher@spglobal.com

— Fumiko Dobashi, fumiko.dobashi@spglobal.com

— Edited by Shashwat Pradhan, shashwat.pradhan@spglobal.com

Source: S&P Global Platts