China Benzene Import Volume to Rise in Q2
Affected by the global public health event, global benzene trade flows changed somewhat. China was and would remain to be the best choice for your export destination.
Global Benzene Trade Flows Overview:
China, the U.S. and Taiwan Province have been benzene importers in recent years, and the European market is almost in a supply-demand balanced status.
In 2019, China was still the largest importer. Its import volume in 2019 was 1.9392 million mt. Therein, about 56%, 10% and 8% came from South Korea, Thailand and Japan respectively. With the release of newly added capacity, India is expanding its business in China, Western Europe, the U.S. and Southeast Asia, which will squeeze market shares of South Korea and Japan.
Chart 1 2019 China Benzene Import Volume by Origin
The U.S. was the second largest importer. On the one hand, with Hengli Petrochemical putting its 4.5 million mt/a PX unit into operation, PX prices started to decline and even fell to the cost line. In the U.S., its benzene resources mostly come from the TDP unit. When PX profits are negative, the operating load of the TDP unit will be greatly suppressed. Accordingly, the benzene output will decline. On the other hand, the severe weather in the U.S. also restricted the logistics. In 2019, the export volume of South Korea-origin benzene to the U.S. took up 34.5% of the total export volume of South Korea.
Affected by the public health event in the U.S., the demand for benzene was sluggish, so Asian benzene supply pressure mounted, which pulled the price down. Accordingly, the arbitrage window between China and Asian was opened from March, and lots of Asian cargoes headed to China.
1. Open arbitrage window boosted China’s import.
As of April 15, import prices of benzene CFR China were $380-400/mt, equal to RMB 3,189.85/mt, while China’s benzene futures offers hovered at RMB 3,450/mt. Therefore, the arbitrage window was opened.
Remarks: Imported benzene RMB prices=CFR China*1.13*exchange rate*1.012+RMB 50/mt.
Chart 2 2019-2020 China-Asia Benzene Price Spread Comparison
2. China’s port inventory mounted.
With successive arrivals of imports, the port inventory kept mounting. The port inventory in East China was 145.5kt on April 15, up 11.07% W-O-W.
Chart 3 2019-2020 East China Main Ports Benzene Inventory
1. China’s benzene supply will be tight due to increasing turnarounds and improving demand in May and June.
Supply: Seen from the turnarounds list, the benzene output loss caused by turnarounds in April hovered at 62.2kt in April, much lower than that in February and March. Accordingly, the operating load in April is estimated at 72% in the industry. Given low costs and high profits, producers are raising their operating loads and some even delay their turnarounds schedule. The followings showed parts of turnarounds schedules.
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