Weak Fundamentals to Weigh on China’s BZ Market in Dec
There was a sustained downturn in China’s benzene market following the National Day vacation. The prices in the East China and North China markets dropped to less than RMB 7,000/mt by the end of November. December could see further pressure on China’s domestic benzene market, given the persistently dismal supply and demand fundamentals.
Global crude oil prices dropped significantly over the National Day holiday. After the break, benzene prices started to decline as well, a trend that continued throughout November. Before mid-November, the price of benzene in the Shandong market was roughly RMB 7,500–7,850/mt. Towards the end of November, however, prices below RMB 7,000/mt were noted in the Shandong and East China markets, indicating even more pessimistic forecasts.
After October, the domestic benzene market generally showed an upward trend followed by a downward trend, especially in East China. Starting from mid-September, due to the lack of optimism about future supply and demand fundamentals, downstream factories have gradually ended their pre-holiday stocking, and the benzene price has begun to decline from its peak. In mid-September, the highest negotiated price in East China reached RMB 8,925/mt. After October, international oil prices continued to fall, dragging down China’s benzene prices. There was a temporary uptick in the market in late October as a result of the benzene inventory building at ports in East China being less than anticipated. After entering November, crude oil prices showed oscillations, while the supply and demand structure of benzene did not improve much, resulting in a stagnant market. Large-scale styrene unit maintenance was scheduled for the end of November, and industry estimates for December remained pessimistic. Consequently, benzene prices in East China and North China markets both fell below RMB 7,000/mt.
Benzene downstream sectors to see increasing maintenance in Dec.
According to SCI, the total supply of benzene from November to December was marginally greater than the entire demand. In Q4, the majority of benzene’s downstream products continued to show meager profitability or even losses. In sectors like styrene and aniline, several unit maintenances have been seen, which has decreased the consumption of benzene. The benzene market may be further harmed by the several downstream units of benzene that are still scheduled to close in December for maintenance, particularly in the styrene industry where maintenance is focused.
2023 Nov-Dec Benzene Downstream Unit Maintenance Schedule
Benzene supply is anticipated to remain ample in December.
According to SCI, it is expected that China’s oil-based benzene output in December will increase by about 17.7kt M-O-M to 1,690kt. In terms of imports, due to weak demand from Europe and the U.S., the import volume of benzene from South Korea will continue to increase in December and may once again exceed 320kt. As a result, China may still have a sizable benzene supply at the end of the year, which would be unlikely to significantly support prices.
Crude oil prices may see moderate rebounds, but the upward force on benzene prices is limited.
It is expected that crude oil prices will stabilize at a low level in December and rebound moderately, but with limited amplitude, it may not have a significant boosting effect on China’s benzene market. After the continuous decline in crude oil prices in November, there has been positive news in the market that Saudi Arabia and others will reduce production to support the oil market. Although the production reduction meeting has been postponed, the market believes that it is highly likely that the reduction will be extended. In addition, refineries in the U.S. will gradually increase the operating rate in the future, leading to growing demand for crude oil. In addition, the United States will moderately replenish its reserves, which will also increase oil demand and boost oil prices. Therefore, there may be a slight rebound in crude oil prices at the end of the year, but with limited rebound strength, it may be difficult to have a significant driving effect on China’s benzene market.
The macroeconomic outlook for December is still not expected to significantly improve, and the fundamentals of benzene supply and demand could continue to weaken. Consequently, it is anticipated that the price of benzene will keep falling in comparison to November. However, following New Year’s Day, downstream customers will sequentially build up pre-holiday stockpiles, which may bring some boost to the benzene market.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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