Episode 553: PODCAST: Asia benzene bolstered by supply issues, firm Chinese import and buoyant US sector

SINGAPORE (ICIS)--Asia’s benzene prices have been on an upswing since the start of the year, along with the general petrochemical complex, as an inflation bias appeared to have set in to global markets. Massive stimulus engaged by governments worldwide to combat the effects of the pandemic had mitigated the worst of economic the fall-out from the disease. However, another effect of monetary stimulus is rising asset prices, most evident since the fourth quarter of last year in rising prices of stocks, commodities etc.



As the vaccine led economic recovery continued to pan out, supply chains have restarted but continued to meet bottlenecks, inefficiencies and disruptions after a near complete shutdown. The Asia benzene market faces a similar backdrop but several other factors contributed to its price uptrend as well.



SE Asia plants unplanned shutdowns in February: PTT No.1 aromatics in Thailand, Nghi Son Refinery & Petrochemical in Vietnam and Hengyi Petrochemical in Brunei
Strong import demand from China as plants/factories resume production quicker than previous years as output rate was higher with more workers available, given the central government’s urging of citizens to refrain from travelling back to hometowns for the Lunar New Year in a bid to contain the spread of the conronavirus.

Strong downstream markets and sectors in China fueled consumption of benzene.
Cold snap/polar storm in the US cut availability, resulting in higher US prices. Given that Asia is a net exporter of benzene to the US, prices in the region similarly rose and effectively shutting down the arbitrage window for now.

After a spectacular run-up, prices could trade sideways or even correct downwards in the near term. The consolidation could last weeks or even extend into the second quarter.

However, with an inflation bias build into the global system, and the vaccine-led recovery expect to continue, petrochemicals and benzene could start another leg higher from mid-year if not sooner.