Daily Archives: March 26, 2012

By Paul Hodges

Chemical prices might not be the first forecasting indicator that springs to mind, but over the recent economic crisis benzene in particular has highlighted economic shifts well before more traditional metrics.

Benzene’s 40 million tonnes of global sales are a key raw material for a very diverse group of end-products, including polystyrene cups, nylon clothing and carpets, pesticides and dyes. Equally, as it is produced from crude oil, benzene provides a highly-sensitive barometer of consumer reactions to changing energy prices.

A key metric is its price premium to naphtha (its oil-based feedstock). The chart above shows this metric since the crisis began in (using ICIS pricing data).

• Typically, the premium has found a floor at $150/tonne
• But it collapsed during October 2008, remaining very weak until February 2009
• The depth of the downturn was also demonstrated by the premium becoming a discount
• It then staged a sharp recovery, which took it back above the $150/t level
Therefore, benzene highlighted, well ahead of other indicators, both the downturn in the wider economy and the equally sudden upturn. Its recent performance therefore merits close attention.