Benzene Market to Extend Strength Despite Downstream Losses
Recently, China’s benzene prices have been rising consecutively, while the prices of major downstream products have been falling below cost lines. Will the benzene market extend the strength or will it be dragged down by the downstream market?
Benzene prices moved up steadily.
Since 2022, China’s benzene prices have showed a rising trend. As of May 19, China’s benzene price in East China closed at RMB 9,080-9,380/mt, up RMB 200-450/mt from RMB 8,880-8,930/mt at the beginning of May, and up RMB 1,780-2,020/mt from RMB 7,300-7,360/mt at the beginning of the year.
From January to May 2022, China’s benzene price kept climbing, and the monthly average price also showed M-O-M rises. In April, the monthly average benzene price in East China market hit a high of RMB 8,521.43/mt, RMB 1,023.33/mt or 13.65% higher than RMB 7,498.1/mt in January. Moreover, in addition to the sharp price rise in March buoyed by surging crude oil prices, the overall price volatility in other months was relatively limited, ranging from 6% to 8%.
2022 Jan-Apr East China Benzene Price
Downstream profits continued to be under pressure on rising feedstock price.
Benzene market prices and posted benzene prices at state-owned refineries both trended higher, which added great pressure on downstream users. Undermined by tepid end demand, it was hard for downstream products to transfer cost downward. Therefore, downstream industries of benzene were facing heavy pressure. Specifically, the styrene market has been in loss since June 2021, CPL producers began losing money in February 2022, and phenol producers also fell into loss in April 2022.
With the cost pressure on downstream markets rising, the trading activeness in the benzene market also cools down slightly. The price of spot benzene is unduly high, and the port inventory was constantly digestated. Market participants are confused about the future market. They dare not blindly chase high, and dare not short the market at will. As for downstream markets, styrene producers have already been used to the low styrene-benzene price spread, so the styrene industry runs stably. Producers who could not afford the high costs had cut down production or shut down few months ago. With the return of maintenance units in May, the rigid demand for benzene from the styrene market is still there.
At present, the CPL industry is struggling the most, and the load reduction of the whole industry is common. The phenolic ketone industry has just fallen into a loss, so the whole industry is still in a wait-and-see state.
To sum up, under the background of high-priced crude oil, the high benzene price brought by strong supply and demand fundamentals may still be maintained for some time. Although the downstream prices fall below the cost line, the industry operating rate is relatively stable at present. It is unlikely to form a negative feedback on benzene in the short term, and the benzene price may remain at a high level.
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