Despite optimistic forecasts for growth in the EU chemical industry, there is considerable concern for the short-term prospects for the oil industry and its impact on the entire chemical industry. The situation can be illustrated by a closer look at just one area of oil processing – benzene.

As benzene is one of the key raw materials for further processing, its price is carefully monitored. Since the beginning of the year, due to an expected overall market recovery, there was increased interest in buying benzene. Yet the price has not risen, due in part to falling oil prices and a glut in pyrolysis gasoline. Further pressure was put on the price of benzine as limited export opportunities and stagnating demand resulted in a fall in its value.

While it was assumed that the price of benzene in early March could be as high as $640/mt CIF NWE, this is not as low as many would like, as deals were made last March for as little as $590/mt FOB NWE.

This development has had a big impact on producer margins, reducing them drastically, which in turn reduces production capacity as investors leave. This downward trend will continue until the oil industry recovers. There is the possibility of benzene exports to North America, where the market has already recovered, so a break in current price trends could occur in the second half of March. Although this in turn is provided that the increased export of benzene in the US Gulf does not pull prices below $2/gal.

With so many factors to be considered, traders are still uncertain as to which direction prices will go, an uncertainty that will likely cause further problems for the EU chemicals market.

Your team Spotchemi