Benzene Prices may Suffer Pressure in Q3 After Hitting Highs in Q2
Introduction: After May, the benzene price entered a new upward cycle. Especially since late May, supply tightness has become prominent, which accelerated the benzene price rise. However, downstream products have been struggling to keep up with the rising trend, leading to continuously increasing losses. Following that, benzene prices temporarily entered a phase of consolidation. After late May, China’s domestic benzene price has seen accelerated rises. As of June 18, the closing price of benzene nationwide was RMB 9,467.5/mt, an increase of RMB 697.5/mt from the same period last month and RMB 3,267.5/mt from the same period last year. The closing price of benzene in the Shandong market was RMB 9,325/mt, registering a rise of RMB 660/mt from the same period last month and RMB 3,125/mt from the same period last year.
Supply shortage buoyed up benzene prices
The temporary tightening of benzene supply and a slight increase in demand have become the main positive factors supporting the high benzene price. However, since the price spread between benzene and most downstream products has further narrowed, the pressure of losses in most downstream fields is also increasing.
The exacerbated supply shortage is the main support for the rise in benzene prices. For one thing, some large refineries have been shut down for maintenance since late May, resulting in a contraction in domestic benzene supply. For another thing, the port inventory in East China has dropped from 58kt in mid-May to less than 20kt currently due to the limited arrival of imported goods.
In terms of demand, with the restart of multiple downstream units, the demand for benzene showed an M-O-M growth trend in May. According to monitoring data from SCI, the demand for benzene in May posted an M-O-M increase of 4.74% and a Y-O-Y increase of 14.02%. The demand in June is anticipated to remain largely unchanged compared to May. Although there has been a decrease in the operating rate in some downstream industries since mid-June, the effect on alleviating the supply shortage is currently not significant.
Recently, benzene price has accelerated its rise buoyed by supply and demand fundamentals, but it is difficult to transmit price downwards as a result of tepid demand in most terminal markets. The main downstream industries of benzene generally experienced profit contraction or a significant increase in losses. There was even a negative price spread between styrene and benzene in mid-June, indicating significant pressure for losses.
Benzene price to suffer pressure at the beginning of Q3
Due to the high benzene price, the styrene price has been lower than the benzene price, and the price spread between benzene and CPL has also narrowed to around RMB 3,500/mt. However, the supply and demand fundamentals of the spot benzene market may continue to support the benzene price in the short term since the port inventory in East China hasn’t seen a growing expectation. Nevertheless, there are increasing plans for production cuts and maintenance in downstream industries, as most industries are suffering from heavy losses. Furthermore, some refineries in North China are projected to resume production after late June, thereby alleviating the supply tightness of benzene and waning the support for the benzene price. In conclusion, benzene prices may face downward pressure after July.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
