US benzene prices are likely to remain under downward pressure during the early months of 2019, as the length in supply that has characterised much of 2018 is expected to remain in place in 2019.
US refinery operating rates are anticipated to remain high to fuel strong demand for US fuel exports, particularly from Mexico. Refiners will also keep rates high in anticipation of healthier demand for diesel as shippers prepare for the International Maritime Organization’s (IMO) 2020 regulations for bunker fuels, which will require ship operators to shift to fuels with much lower sulphur content than currently allowed.
Refineries produce benzene as a by-product of gasoline production and account for around 60% of US benzene production.
Steam crackers are another key source of benzene production, accounting for around 20% of total US production. The US is in the midst of a large wave of new steam cracker builds, with around 5m tonnes/year of new ethylene capacity expected to come on line in 2019.
New US steam crackers are mostly designed to use light feedstocks such as ethane. Using light feedstock causes a significant drop-off in production of benzene and other aromatics as co-products per unit of ethylene produced. Benzene supplies will nevertheless expand with the large volume of new ethylene capacity coming on line.
In addition to rising domestic supplies, anticipated length in the Asian benzene market will also ensure longer supplies in the US.
The US benzene market is structurally short and dependent on imports to meet demand. Much imported product comes from Asia, especially South Korea.
Asian markets are expecting longer supplies in 2019, as the region is adding benzene capacity at a faster rate than downstream derivative capacities are coming on line to consume the incremental benzene supplies.
Demand is not expected to rise quickly enough to absorb the new production coming into the market. The US benzene market is considered mature and benzene demand is anticipated to grow at modest rates over the next several years.
Major benzene derivatives include styrene, phenol, nylon and methyl di-p phenylene isocyanate (MDI).