China BTX Market Robust in H1, 2022
In the first half of 2022, the prices of the benzene, toluene and xylene (hereinafter referred to as BTX) kept reaching new highs. Meanwhile, the export volume of BTX increased, the price spread between China and foreign countries widened, and the spot-futures price spread was expanded. These hot spots have raised the attention of players to the BTX market. However, with the reduction of the impact, the BTX market will gradually return to the supply and demand basis in the second half of 2022, and the price fluctuation range will narrow.
In the first half of 2022, the main influencing factors of China’s domestic BTX market are as follows: First, the cost rose significantly, driving the BTX market prices higher. Second, both supply and demand of BTX trended up, and the demand was better than that in previous years. Third, driven by the peak travel season in the United States, the BTX price difference between China and foreign markets widened, resulting in a change in the import and export pattern. The above multiple factors have helped China’s domestic BTX market price rise to a historical high.
H1, 2022 Jiangsu Market BTX Price Comparison
The international oil price has been rising continuously, driving BTX market prices to rise strongly.
In the first quarter, the international crude oil price continued to rise. In less than 10 days from the end of February to the beginning of March, the WTI price rose by more than $32/bbl, and Brent crude oil price once exceeded $130/bbl. Affected by this, the cost pressure on the BTX market was great, which formed a strong support for the operating mentality of market participants. Therefore, the prices of BTX all walked a rising trend.
BTX supply and demand both trended up in H1, 2022
In the first half of the year, the supply of benzene increased by 9.58% Y-O-Y, and the downstream demand increased by 9.01% Y-O-Y. The toluene supply continued to remain tight driven by domestic and foreign oil blending demand. In addition to the increase in foreign demand for xylene, the demand for xylene from downstream oil blending and PX
It can also be seen from the port inventory that the inventory of benzene decreased significantly, and the inventory of toluene and xylene remained at a low level. The actual available supply of goods was limited.
Domestic-foreign price spread widened on growing overseas demand.
In the second quarter, while the U.S. crude oil and gasoline inventory continued to decline, the U.S. ushered in the summer travel peak, driving the local oil blending demand and exerting a strong impact on the oil price. Against this backdrop, the prices of benzene, toluene and xylene rose broadly. The price difference between Asia and the United States rose to $700-800/mt. Driven by this, the prices of BTX in South Korea rose rapidly, driving the prices of China's BTX market to the highest level in nearly a decade.
BTX export pattern changed on expanding price spread.
The widening price difference between the Chinese and foreign markets, coupled with the depreciation of the RMB during this period, led to a significant decline in the import volume of BTX in China. In June, the negotiation of the export orders of benzene and xylene was even heard for the first time. The export volume of xylene was 6kt in June.
The market influencing factors will be supply and demand fundamentals in H2, 2022.
In the second half of the year, the crude oil prices will be mainly driven by macro, and resistance decline may become the main melody of crude oil trend. The Fed's interest rate hike, OPEC meeting, the impact of European natural gas and the US dollar index are all factors that affect the oil. However, from the economic perspective, the economy is probably in a period of recovery and correction in H2, 2022, and the impact on China’s domestic BTX market will gradually weaken.
In the first half of 2022, the overall prices of BTX grew fast, far higher than the level of the same period last year. At the same time, it is difficult for the price or profit to be transmitted to the downstream. In the second half of 2022, Shenghong Petrochemical, Sinopec Guangzhou Petrochemical and other new units are expected to be put into operation, and the BTX supply will gradually increase. However, the demand side is difficult to increase. After a long period of high costs, the end market of the industrial chain is under heavy pressure, and it is difficult to boost the BTX market.
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