Asian benzene-naphtha spread tumbles on weak benzene demand, firmer naphtha valu

Benzene's premium to feedstock naphtha in Asia has shrunk more than $100/mt over the past six weeks as growing length in the benzene market weighs on prices while naphtha cargo values have firmed on the back of the recent crude oil rally.

The spread between FOB Korea benzene marker and CFR Japan naphtha physical benchmark hit a 35-month low at $141.08/mt Wednesday, down 46.5 cents/mt from Tuesday and down from a six-month high of $250.545/mt touched on August 16.
The spread was last lower on October 12, 2015 at $127.25/mt.

The recent fall means the benzene-naphtha spread is averaging $234.56/mt so far this year, well below the 2017 average of $326.55/mt.

The relative weakness in benzene is owing to ample supply, with end-users saying Wednesday that offers for cargoes of Indian and Middle Eastern origin were plentiful.

Weak demand for Asian benzene from the US has also meant more spot cargoes seeking outlets in Asia.

November FOB USG paper was assessed at 289 cents/gal, or $864.11/mt Tuesday. With freight rates for a 10,000 mt parcel of benzene heading from Asia to the US assessed at $52.50/mt Wednesday, the arbitrage is closed on paper, as the price spread between Asia and US stood at $15.44/mt.

Separately, benchmark CFR Japan naphtha physical cargo price hit a near four-year high of $713.25/mt at Wednesday's Asian close, following movements on front-month ICE Brent crude futures, which passed the $80/b mark this week.

Market sources said requirements for high-density naphtha were largely stable among petrochemical producers, as cracking margins for aromatics production, such as paraxylene, held at high levels.