19:28 PM | April 2, 2020 | Kartik Kohli
The benzene market was facing several challenges in late 2019 with demand and production growth starting to slow. The global economy was decelerating, sustainability pressures were continuing to grow, production capacity was starting up, and tighter fuel regulations were due to come into force in 2020. However, the coronavirus disease 2019 (COVID-19) pandemic has sidelined those challenges and made the outlook for benzene much more complicated, according to Peter Feng, senior director/benzene at IHS Markit. Speaking at the IHS Markit World Petrochemical Conference (WPC) 2020 Online, Feng said that COVID-19 will push benzene prices to historic lows this year.
Benzene is being squeezed by COVID-19 on the supply side and demand side, said Feng. The market is facing tough and dynamic conditions, he said. The risk of disruption is high and affecting every country simultaneously. People are working from home, transport hubs are closing, production plants are shutting, and consumers are being quarantined, said Feng.
Benzene feeds four key petrochemical value chains: styrenics, phenolics, nylon, and isocyanates. They each lead to downstream products used in a range of consumer applications, and the COVID-19 impact on them is mixed. Demand for food packaging has stayed strong, as has demand for some consumer products and medical products, together with monitors and freezers, Feng said. However, demand in the worldwide transportation sector has collapsed since almost all the world’s automotive production has been shut down and demand for gasoline and other fuels has plummeted.
All three main sources of benzene—refineries, steam crackers, and para-xylene plants—are facing an unprecedented drop in demand for their main products because of COVID-19, according to Feng. “Among the sources, refineries are mainly going to be hard hit,” he said. Working from home in Asia, Europe, and the US has caused the sharp drop in demand for gasoline. With the population of Europe and the Americas in lockdown, it will not be long until refineries in these regions have to cut run rates, Feng said.
As a result, the price of benzene will likely reach historic lows during 2020 in the $200s/metric ton, similar to levels reached after the dotcom bubble in the early 2000s and the financial crisis of 2008–09, Feng said. The forecast represents a huge price drop from the $600s/metric ton in 2019.
IHS Markit estimates that worldwide benzene demand will decline by about 2%, depending on the methodology used, in 2020 and rebound to grow about 3% in 2021. Benzene demand grew 1% in 2019, IHS Markit says.
In the longer term, Feng expects some trends accelerated by the pandemic, such as home food delivery, online shopping, and working from home, to have a positive impact on benzene. Greater use of food packaging increases downstream demand for polystyrene (PS) and expandable PS. Online shopping increases demand for all types of packaging and working from home boosts demand for electronic devices and electrical appliances that contain benzene derivatives such as high-impact PS, acrylonitrile-butadiene-styrene, and polycarbonate. However, continued working from home could make the gasoline demand fall permanent, says Feng.