Benzene on the floor
on March 22, 2009

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.

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Comments
  • Ashok Kishore
    March 24, 2009

    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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