European Benzene Prices Shift Balance Amid Trade Disruptions on Key Routes

Hamburg (Germany)- Benzene prices in the European market are once again reflecting a shift, following a continuous decline in Benzene prices since the start of December 2023. Ongoing geopolitical tensions between countries have affected trade routes and the delivery timelines of upstream components (such as crude oil and naphtha gas), leading to delays and heightened freight charges. Emphasizing the importance of Red Sea shipments, the quantities of diesel and crude oil moving northbound have increased notably due to sanctions imposed by Europe and the United States on Russia.

In the event of persistent disruptions in Red Sea transits, vessels would be forced to take longer routes, resulting in increased tonnage requirements and higher bunker consumption for ships in both laden and ballast conditions. This would ultimately contribute to elevated freight costs, significantly impacting the final prices of Benzene. Benzene price quotations were observed at USD 870 per MT, HOB Hamburg, for the week ending December 22nd.

Since mid-November, Houthi rebels in Yemen have notably increased their attacks on commercial vessels in the lower Red Sea, as a response to Israel's actions against Hamas in the Gaza Strip. However, there is no consensus in the Benzene market regarding the extent of the impact this may have on the energy trade. Recent attacks by Houthi militants in the Red Sea and the Bab al-Mandab Strait have risen, elevating risks for ships transiting through the Suez Canal. The Red Sea serves as one of the world's busiest shipping channels, connecting Europe to Asia and East Africa.

If the German tax, applicable at cross-border points, is maintained and Italy introduces a similar charge, the gas markets in Central and Eastern Europe could face significant negative consequences impacting the Benzene prices. These nations might encounter difficulties in accessing gas sources imported from Western countries, potentially compelling them to boost imports from Russia through Ukraine or Turkey. The influence of the German tax is already evident, as the Czech spot gas premium has surged by 50% compared to the German equivalent since the imposition of the levy, raising the final production cost of Benzene.

Apart from Qatari vessels, it is uncertain whether the risk to LNG and other ships might escalate, compelling additional companies to explore alternative routes or adjust cargo destinations for optimization. If the European gas market experiences increased pressure later in the winter, any disruptions could have more profound consequences. As per ChemAnalyst, the Benzene prices are anticipated to move steadily in the coming weeks amidst the conflict and increased production cost of Benzene in the domestic market.