China Benzene Price Notched an 8-Year High
China’s benzene prices once again ushered in a high of RMB 10,000/mt. Although the prices of most of its downstream products have fallen below the cost line, some units still maintain normal operation. What is the current profitability of downstream markets? How will the benzene market perform in the later stage? What will happen to the market supply and demand environment?
On June 6, the prevailing price of benzene in East China broke through RMB 10,000/mt and notched a new high in recent eight years, buoyed by firm crude oil price, strong styrene futures and the rise in benzene posted price at state-owned refineries. By June 9, benzene price in East China closed at RMB 10,200-10,350/mt/mt, up RMB 2,900-2,990/mt or 40.18% compared with the RMB 7,300-7,360/mt at the beginning of 2022.
2022 China Oil-based Benzene and Coal-based Benzene Price Comparison
The price of benzene has successfully broken through the eight-year high, and the most influential factor is naturally crude oil. On June 9, WTI reached $121.5/barrel, an increase of 57.83% over the beginning of the year, and Brent also increased by 49.39%. It is also obvious from the table below that the lower the position of products in the industrial chain, the narrower the price increase.
Benzene Industrial Chain Closing Price
The price spread between benzene and styrene narrowed from RMB 1,270/mt at the beginning of the year to RMB 945/mt on June 6, and the price spread between benzene and CPL also narrowed from RMB 6,620/mt at the beginning of the year to RMB 5,420/mt, indicating that the cost pressure on downstream producers is high.
With the sharp rise in benzene prices, the profitability of downstream producers has plunged. Since April, the top four downstream products of benzene have suffered losses. It was originally estimated that the negative feedback would start from the bottom up. However, from the price of benzene, it took only 40 days to rise from RMB 8,500/mt at the end of April to RMB 10,000/mt.
At present, although the profits of the four downstream industries are shrinking, it is not common for them to shut units down and reduce load due to profit losses. In May, downstream maintenance in Shandong increased, and the resources delivered by automobile can only be sent to East China. Therefore, benzene prices in Shandong were under pressure in May, and the price increase was slightly limited compared with that in East China. However, as some styrene plants and phenol plants in East China that can accept automobile-delivered benzene are about to start, benzene prices in Shandong begin to keep up with the pace in East China.
The crude oil is expected to continue the strong trend. On the one hand, the supply will remain tight in the short term. On the other hand, the high oil price does not restrain demand, and with the boost of the peak demand, the operating rate of refineries has increased. In addition, in the process of continuous decline of U.S. stocks, the monetary policy of the Federal Reserve, such as the previous interest rate increase measure, will be moderately relaxed in consideration of the downward pressure on the economy, which will greatly reduce the downward pressure on the capital market. Therefore, whether from the fundamental or macro perspective, the oil price is still strong next month.
From the supply and demand situation of benzene industrial chain, the output of benzene in April reached the lowest point in the year due to centralized maintenance. From May to June, the overhauled benzene units returned in succession, and the output is expected to be improved. However, as more disproportionated feedstock is used for producing gasoline components in foreign countries, the tight supply of overseas benzene has not been improved. It is expected that the import volume of benzene will remain at a low level from May to June and even July.
From the demand side, styrene and CPL industries are in intensive maintenance in June, so the consumption of benzene will be reduced to a certain extent. However, according to the current news, the downstream maintenance units will return in July, and the demand for benzene is expected to increase again.
In general, the strong support from crude oil will keep the absolute value of benzene at a high level. Although the downstream industries find it hard to afford the high price of benzene, it is believed that in the short term, benzene prices will remain at a high level.
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