So, if you had been able to play the obvious arbitrage in the exhibit below when we published it first in March, you would have done quite well. You would have done better if you had just bought benzene on both continents, but you would have taken more risk. We like these scatter charts and we will use them more often when there are obvious regional arbitrages or just product arbitrages within a region. The overall benzene tightness has been caused by production outages in the US, shipping issues to Europe, and very strong demand for benzene derivatives. The start-up of the Shell POSM unit in the Netherlands has likely added to the imbalance as the facility is a major ethylbenzene consumer.
The lack of polymer at converters in Europe (as well as in some cases in the US) is driving the surge in US rail car volumes as US Gulf facilities restart and product moves to domestic consumers and ports. As we noted earlier in the week, converters polymer availability likely looks less stressful 4-6 weeks out than it does today – maybe a little longer for Europe.
We note the ethylene problems in the US and their support for spot pricing but remind clients that even with all the polymer units running flat out, the US is net long ethylene on paper, and the new Total/Borealis unit, which should be in start-up right now, is only going to make that balance worse until the BayStar polyethylene unit starts up next year. There is demand for US ethylene in some export markets, but not at current US spot values and unless the production problems persist, a correction is on the cards for US ethylene.