Benzene on the floor

benzene Mar09.jpgBenzene is one of the most widely used, and widely traded, chemicals. It is therefore an excellent leading indicator of chemical industry supply/demand balances, and profitability.
A year ago, the blog noted that benzene prices had “hit a ceiling”, suggesting that industry profitability was close to a peak.
• Then in October, when they fell to naphtha levels, benzene provided a first indication of “just how dire market conditions” were to become.
• By November, benzene prices were anticipating crude prices of $16/bbl, indicating that producers were “selling on a firesale base” and that profitability was “getting close to the floor”.
Since then, benzene prices have indeed risen from December’s $258/t low. But, as the chart shows (based on ICIS pricing), benzene has still not recovered its normal premium versus naphtha. Prices have averaged just $332/t so far in 2009, versus an average naphtha price of $378/t. Such an extended period of discount has never happened before.
Unfortunately, this suggests that, unless Q2 brings a swift improvement, the outlook for 2009 industry profitability remains fairly dire.

1 thought on “Benzene on the floor”

  1. It has become fashionable to make dire forecasts for all kinds of economic activity, and petchem profits should be no exception.
    However, I would contend that we take a more positive approach and try and collectively perk up people involved.
    How about: “Q1 2009 profits are expected to be better than Q4 2008.” Do a survey and see what you get. Certainly the share prices of all major chemical companies have seen a good updraft in March.
    Enough of this moping!

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