How Will Benzene Market Move in September?
In August, China’s benzene prices fell rapidly from highs, with a monthly decline of 14.83%. At the end of August, benzene prices slightly rebounded boosted by the rise in downstream styrene market. In September, benzene prices are expected to rise first and then trend lower, mainly driven by the changes in downstream demand.
In August, China’s domestic benzene market price dropped sharply under the pressure of multiple bad news in supply and demand, crude oil and overseas market. The price of oil-based benzene in East China dropped by RMB 1,388/mt or 14.83% to RMB 7,924/mt in total. Although the spot resources of oil-based benzene and coal-based benzene in North China decreased as a result of unit maintenance, market players were still not optimistic about the future market. Consequently, the transactions of low-priced benzene were still lukewarm.
Near the end of the month, both crude oil and downstream styrene prices gained notably, pushing up benzene prices. moreover, the buying activeness was also lifted. Taking the EXW price of benzene in East China as an example, on August 30, it gained by more than RMB 200/mt to RMB 7,600-7,650/mt in a single day. Following this, the spot benzene prices in North China also rose to varying degrees.
According to the prediction and calculation of the output of the four main downstream products (styrene, CPL, phenol and aniline) of benzene, the consumption of benzene in September is expected to decrease by 1.69% to 1.65 million mt compared with August. The main reason for the decrease is that the consumption from the styrene market will be reduced due to unit failure and production cut, but the impact is limited.
From the perspective of inventory, along with the decline in benzene prices in August, the inventory of benzene at most downstream factories was gradually decreasing. At present, the benzene inventory at most downstream factories is at a low level. Considering that the National Day holiday is approaching, downstream factories generally need to stock up before the holiday, and the overall demand for benzene in September may be improved compared with August, which is one of the main favorable factors supporting the benzene market in September.
In May and June, the USD benzene price hovered at a hefty level, leading to slack imports of benzene. In July, the import volume of benzene was only 107.4kt, hitting a new low of single month import in the past two years. Since the middle of July, with the demand for benzene falling in Europe and the United States, and the descend in the crude oil prices, the USD price of benzene in the Asian market has also begun to drop significantly. After that, the arbitrage window between China and Asia gradually opened. It is expected that the import volume of benzene will recover significantly in August and September. Therefore, from the perspective of import supply, it is expected that a relatively large number of goods will arrive at ports in September, which will have a certain negative impact on the domestic benzene market.
From the perspective of the crude oil market, it is expected that the crude oil prices will continue to fluctuate widely in the medium and short term. According to the current news, the Iranian nuclear agreement is likely to be reached, which will exert downward pressure on the crude oil price. However, we also need to pay attention to the intensity of Saudi Arabia's production reduction. In the process of economic recession, Saudi Arabia has made it clear that it will stabilize the oil market. Moreover, as the winter approaches, the energy problem in Europe will once again disturb the oil market. In short, the oil market is likely to maintain a highly volatile trend under the tug war between nuclear agreement and production cut. The average crude oil prices in the next two months are expected to remain stable, and this will support the benzene price to a certain degree.
On the whole, there may be opportunities for the benzene price to continue to rebound in early-to-mid September. Near the end of the month, with the gradual limitation of logistics and transportation, the benzene price may again show a downward trend after rising.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
