SINGAPORE (ICIS)–Asia’s benzene market weakened this week amid sharp falls in crude futures overnight, as global commodities markets were hit hard when the US threatened to impose tariffs on additional $200bn worth of Chinese goods.
Price indications for benzene on Thursday were down by more than $10/tonne from the previous day, on concerns over the escalating trade war between the US and China.
In early July, benzene was trading at above $830/tonne FOB (free on board) Korea, according to ICIS data.
Crude futures slumped at the close of trade on Wednesday, with Brent crude shedding $5.46/bbl to $73.40/bbl, while US crude was down $3.73/bbl at $70.38/bbl.
Concerns about the US-China trade war are expected to dominate the Asian benzene market in the near-term.
In the current escalation of the conflict, market players will remain cautious, resulting in a slowdown in spot trades.
Spot benzene prices had been on an uptrend after touching $800/tonne FOB Korea in the second half of June, backed by a drawdown in inventories.
In the key China market, shore tank inventories declined to 235,500 tonnes for the week ended 6 July, down from 244,200 tonnes two weeks prior, according to ICIS estimates.
“The drawdown in inventories in China over the past two weeks helped lift the market,” said a broker in China.
However, the positive momentum appeared to have fizzled out as players shifted their focus on the escalation in the US-China trade row.
“The trade has turned cautious again given the increased uncertainty due to the trade war,” a Singapore-based trader said.
Benzene is a base chemical used to make other chemicals such as styrene monomer (SM), phenol and caprolactam.
Meanwhile, the benzene demand-supply balance in Asia is expected to turn more positive as the third quarter progressed.
Consumption would rise when a downstream SM plant and an aniline facility in China start up.
Also, with the third-quarter manufacturing-for-exports season in China, consumption of resins and chemicals usually improve.
This would also spur demand for benzene as it is a key feedstock for various downstream chemicals.
Picture: Container port in Qingdao, Shandong Province, east China (Photographer: Yu Fangping/Pacific Press via ZUMA Wire/REX/Shutterstock)