July Benzene Spot-Futures Price Spread Hit RMB 1,000/mt
In July, there were inflection points in the spot and far-month benzene futures market driven by the weakness of crude oil. However, due to the shortage of supply, the front-month market was stronger than far-month market, leading to a spot-futures price spread as high as RMB 1,000/mt, which was breathtaking.
Cost
Recently, crude oil prices have rebounded after falling, but the rebound strength is general and the continuity is not strong. The U.S.' visit to the Middle East, which was the focus of the market, came to an end. Under the expectation that Saudi Arabia will increase production, oil prices mainly fell in the early stage. However, Saudi Arabia did not have a clear plan to increase production, so the crude oil price rose in the later stage. The overall market sentiment was still cautious. The recovery of crude oil exports in Libya also limited the rise in crude oil prices to a certain extent, thus the price rebound was not strong.
The downward move of the crude oil price is undoubtedly the biggest signal that the benzene market has changed from strong to weak. Although the oil price showed a certain rebound in the short term, the rebound was limited, and the positive support for benzene was still insufficient. Therefore, the prices of far-month benzene futures dented in succession.
Output
From the perspective of China’s domestic production, unscheduled shutdown and overhaul of large-scale units led to a reduction in the overall supply, which played a positive role in improving the supply and demand pattern. In addition, there were not many new units being put into operation, so the overall output didn’t improve a lot.
Import & export
In June 2022, the import volume of benzene in China was 208.7kt, and the total import volume from January to June read 1,601.5kt. The average import price was $1,260.79/mt. On the whole, due to the good demand from the U.S. in the early stage, China’s benzene import volume has been at a low level. It has played a decisive role in improving domestic supply and demand.
In June 2022, China imported 98.2kt of benzene from South Korea, making up 47% of the total. Imports from Brunei and Thailand were 48.1kt and 26.1kt, accounting for 23% and 12% of the total, respectively.
In June, 157.1kt or 75% of China’s imported benzene was via the general trade, and 45.6kt or 22% was via the processing trade with imported materials.
In June, Zhejiang-based companies received 71kt of imported benzene, making up 34% of the total, followed by Guangdong and Shanghai, with imports of 54.2kt and 30kt, accounting for 26% and 15%, respectively.
Demand
Judging from the current situation, the downstream industries of benzene have suffered great losses, among which the load reduction of phenolic ketone and CPL industries is relatively common, which has a great negative impact on the demand side of benzene.
On the whole, with the import negotiations in August recovering, the import volume is expected to rebound. Moreover, the restart of domestic maintenance units will further drive the increase in supply. However, the supply and demand structure may not improve until late August. Therefore, under the short-term supply tension, the spot-futures price spread of benzene will remain at a high level.
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