Shandong-East China Benzene Price Spread to Narrow
Since the second half of 2022, the downstream capacity of benzene in the Shandong market gradually rose, so the local supply gap gradually expanded. The price spread between the Shandong and East China markets narrowed year by year. For the inconsistent expansion of upstream and downstream capacity in the Shandong market, the local supply-demand gap may continue to widen and the Shandong-East China price spread may further narrow.
The Shandong-East China benzene price spread may continue to narrow.
Over the past five years, the Shandong-East China benzene price has shown an overall narrowing trend. The north-south price spread decreased from RMB 243/mt in 2019 to RMB 60/mt in 2023. The main reason for the contraction was the change in the north-south supply and demand pattern, particularly the rapid expansion of downstream capacity in Shandong led to widened supply gap of benzene, thereby underpinning the price accordingly. However, the spread slightly widened to RMB 108/mt in 2024, because no new downstream units came online in the northern region. In addition, the imported goods were fewer at East China port. The above reasons strongly supported benzene prices in East China and the average north-south price spread slightly widened in 2024.
Shandong is the second largest trading market of benzene in China.
The Shandong market is the second largest trading market in China, following the East China market. SCI reckons that the capacity of oil-based benzene in Shandong may account for 14% of the national capacity, while the consumption volume of benzene may account for about 21% of the national total. The inconsistent expansion of upstream and downstream capacity in the Shandong market has led to a more active market and a widening supply-demand gap in recent years. SCI data shows that from January to September 2024, the self-sufficiency rate of benzene in Shandong was only at 55%, with a supply gap reaching 1,880kt. In comparison, the self-sufficiency rate of benzene in East China reached 76% during the same period. The widening supply-demand gap has provided strong support for benzene prices in the Shandong market.
2024 benzene supply structure in Shandong.
The supply structure of benzene in the Shandong market consists of three sources: provincial oil-based benzene, provincial coal-based benzene, and outsourcing resources. SCI data indicates that from January to September 2024, Shandong’s benzene self-sufficiency rate was only 55%, with nearly half of the benzene supply depending on other regions. As Shandong is a major coal-based benzene production region, the supply proportion of the oil-benzene and the coal-based benzene was 76% and 24% respectively.
2024 benzene demand structure in Shandong.
Many downstream industries of benzene are concentrated in the Shandong market, such as styrene, CPL and aniline. The demand for benzene from styrene and CPL sectors may account for 34% and 24% respectively, and aniline demand may be at 20%. Additionally, adipic acid and phenol may account for little.
Supply gap may continue to expand in the Shandong market.
In 2025, despite expected commissioning of large-scale units in Shandong, there may also be some new downstream units come online. The benzene supply may be tight in Shandong. As the supply gap widens, players may pay more attention to the Shandong market. It is anticipated that supply and demand may continue to provide strong support for prices in the Shandong market. The north-south price spread is likely to narrow further, and even the price in the Shandong market may be higher than in East China periodically.
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