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Record Year for Benzene Prices; CMAI Analyzes the Future Effect on Derivative Demand
Tuesday February 13, 11:20 am ET

HOUSTON, Feb. 13 /PRNewswire/ -- Chemical Market Associates, Inc. (CMAI) reports in its recently completed 2007 World Benzene Analysis that 2006 was a record year for benzene prices worldwide due to severe pressure from high feed costs and tight supply conditions caused in part by the much prolonged fall- out of the 2005 hurricane season in the U.S. Gulf Coast. CMAI consultants explore this and various other market impacting scenarios in this annual global study covering the period 2001 to 2011 for the global benzene market. The analysis examines historical and forecast supply and demand dynamics, trade patterns, pricing relationships, profitability, production costs and technology. Access to CMAI's online Capacity database and new online Supply/Demand database gives clients the necessary tools for their strategic business decisions. Some key issues examined in the analysis are:

What impact is this continued strong pricing having on the overall outlook for derivative demand?

Demand growth continues to be significantly impacted by these short and long-term cost pressures and drives towards substitution, despite strong derivative capacity growth. Growth rates were impacted markedly during 2005 and 2006, and absolute demand has fallen behind the projected pace relative to increases in production capacity. Therefore, derivative balances are structurally easing and operating rates are falling.

What are the repercussions on the mature markets in the West from the rapid expansions in the East?

The pace of investment in new production capacity is accelerating globally, driven in part by recent returns to production, but mostly continued investment in the polyester intermediates sector. Two-thirds of the investment is being undertaken in Asia and the Middle East. There is a global shift away from the traditional established markets in the trans-Atlantic basin. These western markets are continuing to see pressures on production caused by high alternative feed cost, diminishing refinery feed volumes and an aging asset base. This shift is likely to accelerate through the balance of the decade and further threaten the position of the western markets as primary derivative exporters to the world and key price setters.

Will the next round of gasoline reformation in the U.S. result in a wholesale change in North American benzene balances?

The reach of the world's largest gasoline market has a significant impact on the flows of blend stocks including separated aromatics that were established into the U.S. during the height of the 2006 gasoline season. Without a major change in U.S. gasoline consumption or formulation, and or expansion of production capability, it is likely that pressure from high alternative values will again threaten to erode the competitiveness of benzene derivatives in their core markets. The current demand for U.S. olefins, in the form of styrene and cumene, is at risk should the U.S. natural gas price move back into an uncompetitive realm again.

CMAI's 2007 World Benzene Analysis is available in book and CD-ROM format. Online Capacity and Supply/Demand databases create a full spectrum of knowledge pertinent to these markets.

CMAI is a petrochemical, plastics, fibers and chlor-alkali consulting firm that services a wide range of companies all over the world. Since 1979, CMAI's goal has been to provide accurate, timely consulting services for the worldwide industries that it covers. CMAI maintains offices in Houston, New York, London, Dubai, Dusseldorf, Singapore and Shanghai. Clients to CMAI services include chemical and oil companies, engineering & construction companies, banking and financial institutions, plastic converters, grocers/retailers, government agencies and trading companies.

Source: Chemical Market Associates, Inc.

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