Downtrend Continues for European Benzene Prices in July, Weak Demand Outlook to Blame

Hamburg (Germany)- The Benzene market dynamics in the European market have continued to showcase the declining trend amidst the decreased production cost and weak demand. Several factors are influencing feedstock Naphtha prices, including global geopolitical tensions and abundant local inventories, which in turn impacted Benzene production costs in Europe. This situation has created a challenging environment for producers who are grappling with fluctuating raw material costs and the resultant pressure on their profit margins. As a result, the European Benzene market remains volatile, with producers and consumers closely monitoring geopolitical developments and inventory levels to navigate the uncertain landscape. The Benzene prices in the German market ranged between USD 960 to USD 1115 per MT, FOB Hamburg in the last week of July 2024.

The decline in Benzene prices is primarily attributed to low demand, which hindered producers and many accounts from maintaining margins. This lack of demand created a challenging environment for the industry, leading to reduced production volumes and significant financial strain. Consequently, Benzene manufacturers had sufficient inventories to cater to the demand outlook from the domestic and international, ultimately impacting their profitability and long-term sustainability.

The substantial decline in demand for Benzene, along with abundant inventories in its downstream sectors (such as styrene and other aromatics) and various derivatives, has affected the final Benzene prices in Europe. Benzene consumption occurs in varying sectors such as construction, automotive, plastics nylon, and others. The German economy unexpectedly shrank in the second quarter after narrowly avoiding a recession earlier in the year, and July saw an increase in inflation, highlighting the ongoing challenges faced by the euro zone's largest economy. Preliminary data from the statistics office indicated that Germany's gross domestic product (GDP) decreased by 0.1 percent in the second quarter compared to the previous three-months period.

The market outlook has shifted, and now a rollover or further, albeit smaller, variations in prices are anticipated in the middle of the third quarter of 2024. The combination of reduced demand and high freight costs has created a complex market scenario, influencing both domestic and international trade dynamics of Benzene. Sellers and buyers alike are navigating these fluctuations, adjusting their strategies to accommodate the evolving economic landscape and market conditions. As per the ChemAnalyst, Benzene prices in the European market are expected to fluctuate in accordance with the demand outlook and the overall production cost of the commodity depending on the feedstock naphtha prices.