The volatility in the Northwest European benzene market is causing concerns that downstream demand from the cyclohexane market may decrease as market participants could scale back run-rates to reduce exposure to benzene movements in the second half of the year, industry sources said.
Substantial movements in the monthly benzene contract price have been disrupting margins for downstream cyclohexane producers throughout the first half of 2015.
“These huge monthly price movements are making it harder for us to plan ahead; a hundred dollar jump, a hundred dollar fall, it’s putting real pressure on budgeting for the year,” a cyclohexane source said.
“So the only thing I can do is scale back production rates to reduce exposure to large increases,” he said. “For larger benzene consumers it’s easier because they can stem large rises and falls in feedstocks and benefit from large economies of scale.”
NWE benzene contract prices have been fluctuating widely this year (see table below).
The MCP for July stands at $882/mt (or Eur792/mt) CIF Amsterdam-Rotterdam-Antwerp, an increase of $112/mt from June.
Another source said the cyclohexane market was different from the larger derivatives of benzene such as styrene monomer, where supply tightness due to turnarounds at NWE production units caused a detachment from feedstock benzene during the year.
“Styrene doing very well against benzene as they’ve not been moving together, but it’s not been true of other benzene-based products, which have seen margins squeezed this month,” the source said.
Cyclohexane is a derivative of benzene and uses a feedstock ratio of 0.94 for benzene in the production process.
This puts feedstock cost at approximately $829/mt for July, rising $105/mt from June.
Total NWE benzene demand stands at approximately 7 million-7.5 million mt/year, with cyclohexane accounting for approximately 10% and styrene for approximately half of benzene demand.