Benzene supply in Europe and the United States will return to normal in the second half of the year, alleviating the imbalance between supply and demand

After an uncharacteristically tight first half, benzene supplies in the U.
S.
and Europe are expected to return to normal in the second half of 2021, easing demand for Asian cargoes
.

In the U.
S.
, limited imports from South Korea and sub-par refinery operating rates have also dampened refinery capacity in Texas and Louisiana after a mid-February winter storm destroyed more than 4.
6 million bpd.
U.
S.
Benzene Stocks
.

U.
S.
supply disruptions and limited material from Asia disrupted shipments to Europe, while sharply lagging markets, strong Chinese demand and limited ship supply further limited Asian exports to Europe and the U.
S.
in the first half of 2021
.

However, with the easing of market price fluctuations around the summer and the increase in global supply, European benzene consumers are expected to have more products arriving in Europe to fill the gap
.

Shortages are also expected to ease after ExxonMobil Chemical resumes production at its Botlek plant in the Rotterdam region of the Netherlands
.

U.
S.
supplies will increase around July as benzene cargoes from South Korea begin to arrive in large quantities in the U.
S.
Gulf
.
South Korea shipped roughly the same amount of benzene to U.
S.
shores from May 1 to 10 as the entire April load, KITA data showed, and the U.
S.
is expected to overtake China overall in May as South Korea’s top importer of benzene
.

U.
S.
domestic production is also expected to increase, the sources said
.
Covid-19 vaccinations and improved demand for travel and air travel in the summer have prompted U.
S.
refiners to ramp up production of gasoline, jet fuel and middle distillates
.

As benzene profit margins were staggering in the first half of the year, Asian producers were running at high speed to maximize profits, leading to a rise in exports from Asian countries
.
From January to April, the benzene-naphtha oil spread in Asia averaged $240/ton, and hit a high of $475/ton in mid-April
.

In contrast, the p-xylene-naphtha oil spread averaged $224/ton from January to April, with producers shifting their focus to benzene production and sales
.

Asian margins remain uncertain in the second half as supplies gradually recover, and benzene is likely to retain its first-half advantage, the sources said
.

"The pace of recovery in local demand in the West is likely to pick up rapidly over the next six months," Platts wrote in an April report
.
They forecast that refinery net utilization could reach around 95% by mid-summer
.
"

But market participants are unsure whether this increase will be enough to depress prices amid strong demand across the downstream value chain for benzene and a strong recovery in U.
S.
manufacturing
.
Styrene producers are also not expected to cut prices significantly, and there are no SM units planned for overhaul in the U.
S.
for the remainder of 2021
.

Downstream demand remains healthy

Demand for downstream products such as styrene and phenol is expected to remain healthy
.
Declines in Covid-19 cases and progress on vaccination programmes offer a glimmer of hope for easing lockdowns across Europe, while supporting further demand for benzene and its derivatives
.
Increased summer car travel also means refineries are likely to increase production of road fuels and increase the supply of benzene feedstocks
.

Real demand for styrene is expected to be stronger in the second half of the year, but a reduction in SM imports from the U.
S.
could put pressure on benzene prices, a source said
.

"The increase in styrene capacity in Asia will have a huge pulling effect on benzene," said a trader
.

The coexistence of delays and startups in downstream capacity additions in China through 2021 has increased demand for benzene, especially in southern China where commercial storage is not widely used
.
Meanwhile, China's integrated refineries have an oversupply of benzene, and the start-up of styrene units at these refineries has been delayed until 2022
.

The FOB Korea benchmark price hit seven-year highs several times in April and May as end-users in Asia were unhappy with sharp price increases as goods were sold outside of Asia, with fewer available goods for Asian buyers
.

There has been a wide gap between bids and offers in the CFR Asian market, with sellers considering global delivery prices, and CFR Asian buyers are now seeing spot offers that are almost 10 times higher than the 2021 term contract benzene price
.

"Buyers in Asia are having a hard time putting up with the cost hike for reasons not related to Asia
.
The entire styrene chain will eventually normalize in the second half of the year ," said one buyer
.
Many sources said the first half was intermittent.
Sexual, unlikely to be the norm in the future
.