China Benzene Market to Face Headwinds in Oct
Insights:
After September, the benzene price fell from a high level due to the decreased crude oil price and tepid macro environment under the background of traditional peak demand season. The crude oil price fluctuated after the fall and may temporarily inch up due to the bullish fundamentals as National Days approaches. After October, the benzene market may come under pressure again due to the uncertain macro environment and the weakening supply and demand fundamentals.
The benzene chain market price tracked the decline in crude oil prices.
The benzene price declined due to the shift between positive fundamentals and negative macro environment after September. The East China benzene price hit the lowest average price of RMB 8,075/mt on September 11, a drop of RMB 565/mt or 6.54% from the end of August. From late August, the styrene price fell rapidly due to the notable drop in the crude oil price, which dragged down the price of benzene. In addition, the benzene price was more dragged down by a pessimistic macroeconomy although the benzene supply-demand fundamentals were passable and the downstream restocking demand remained stable. Approaching the Mid-Autumn Festival holiday, the benzene mainstream price inched up from a low level under the background of the recovery of crude oil and styrene prices. By September 14, East China’s benzene price bounced back to RMB 8,375/mt, up by RMB 300/mt from September 11.
As the National Day holiday approaches, both positive and negative factors exist in the benzene market. It’s predicted that the benzene price especially the Shandong benzene price may inch up due to the restocking demand of downstream factories. In the long term, however, the benzene fundamentals and the macroeconomy may be weak, which may put the benzene market under pressure again.
The demand supports the benzene price before National Day.
Downstream factories actively stock up ahead of the National Day, which may boost the benzene price. SCI reckons that the total demand volume of benzene may be around 2,530kt in September, up by 4.05% from August. Additionally, the stock-up tempo of most downstream factories did not meet anticipation due to the benzene price being dragged down by related products and buyers bought when prices went up, not when prices went down. However, with less than two weeks between the Mid-Autumn Festival and the National Day holiday, some northern downstream factories may still face a shortfall in raw material inventory. Moreover, Shandong Fuyu Chemical’s 220kt/a phenol unit went into trial production and some downstream units resumed operations, which is expected to drive up demand and benefit the benzene market.
The increase of domestic benzene supply fell short of expectations and the imports remained stable.
The output of oil-based benzene and coal-based benzene increased slowly from September to October, while import supplies were relatively stable, leading to a slight price difference between different regions. In the North China market, especially in Shandong, the second-largest demand market in China, coal-based benzene supply accounts for about 30% of supply. However, the spot supply of coal-based benzene decreased continuously in August due to the sustained losses in the coal-based benzene industry and the significant increase in shutdowns and production cuts after August. It’s predicted that the supply of coal-based benzene may be difficult to increase under the situation of continuous reduction of crude benzene supply from September to October, which may benefit the northern spot market. In the East China market, the import supply made up a significant portion in addition to the oil-based benzene supply. However, the arbitrage window between Asia and America closed after September and most Korean supplies were exported to China. Therefore, it’s expected that low-cost imported benzene supply may remain high in September and October, exerting a bearish drag on the East China benzene market. Overall, the benzene northern and southern markets may form a mutually restrictive situation due to the unbalanced supply of goods, limiting clear directional guidance for prices.
Short-term fundamentals drove market warm-up, and “Silver October” may perform lackluster.
The “Golen September” of the benzene market did not come and the benzene price fell at a high level in early September. As the National Days approaches, the benzene price may inch up due to the strengthened support of benzene fundamentals against a background of temporary macro stability. The demand for some end plastic and chemical fibers may be weakened after National Day, leading to a weakening fundamental support for benzene. Furthermore, the macroeconomy remained pessimistic and the future international crude oil prices are uncertain due to factors like the U.S. Federal Reserve’s monetary policy and production cuts by oil-producing countries. As a result, the benzene market may come under pressure again after October.
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