Asia FOB Korea benzene hits year-to-date high on firm US, China demand.

The Asian benzene FOB Korea benchmark hit a year-to-date high at $695.33/mt Thursday, with firm buying from China and the US supporting sentiments across the region.

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Asia FOB Korea benzene hits year-to-date high on firm US, China demand.

Petrotahlil :The price was last higher on November 5, 2018, at $716.00/mt. Stronger-than-expected buying has been seen for Asian material since mid-June, with the three largest importers of South Korean-origin material -- China, the US and Taiwan -- helping to digest benzene from structurally-long Asia. South Korea exported 1.43 million mt of benzene between January and June 2019, up from 1.28 million mt over the same period last year.

UNCERTAINTY OVER ARB BETWEEN ASIA AND US

The FOB Korea-DDP USG arbitrage window swung open in mid-March, with the FOB USG paper Mo03-FOB Korea price spread hovering above average spot freight rates between the two regions of approximately $55/mt, Platts data showed.

This has encouraged cargo movements from North Asia to the US, with a notable pick up in benzene volume headed to the US in April.

Higher toluene prices drove demand in the US, which translated to poor margins for toluene conversion unit operators by the end of Q1 and less domestic benzene output.

The negative margins had an impact on over 2 million mt of benzene production, Platts data showed. Traders were adopting a wait-and-see approach amid uncertainty on the extent of arbitrage opportunities for deep-sea shipments.

With poor conversion margins going into the second half of 2019, toluene prices have largely been supported by gasoline demand. This demand will inevitably fade heading into Q4, pressuring toluene prices lower and TDP/STDP margins should improve, market sources said.

If margins stay firm for an extended time, domestic benzene output will increase as well, reducing demand for imported material from the US. September DDP USG was discussed at 247-262 cents/gal Wednesday, or $738.50-783.30/mt, while the FOB Korea benchmark was at $695.33/mt Wednesday, bringing the price spread between the two regions to $43.10-$87.90/mt.

DEMAND FROM CHINA TO STAY FIRM IN Q3

Inventory levels in East China commercial tanks hit a year-to-date low this week, at 187,000 mt on Wednesday.

Inventories were last lower on December 26, 2018 at 163,900 mt, which subsequently increased as market participants stocked up ahead of the Lunar New Year.

However, with China importing less benzene in Q2, inventory levels also began to decrease.

According to China Customs Statistics, the country imported 132,000 mt of benzene in May, down from 247,872 mt in April. A market source pegged imports in June at below 100,000 mt.

Amid tightening supply, China Petroleum & Chemical Corporation, or Sinopec, a major Chinese benzene producer increased its domestic listed ex-tank price to Yuan 5,250/mt Thursday.

This was the second time this week that the listed price was increased, and the fourth time this month. Prices were adjusted upward by Yuan 100/mt each time, reflecting bullish sentiment in the East China market.

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