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Insight | Time: Jun 24 2020 2:37PM
China's benzene weakens on ample supply & thinning demand
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China's benzene prices slipped gradually since the second week of June, after going up in early June boosted by firmer oil price, with East China index fluctuating down from 3,635yuan/mt on June 8 to 3,350yuan/mt on June 23. CFR China price slipped from $455/mt to around $425/mt. Trading sentiment slowed down as the supply-demand situation has shown signs of weakening.

Crude oil prices stood above $40 per barrel, and the continuous support for benzene market is weakening. Market participants paid more attentions on the fundamental itself.

Sinopec revised down benzene listed price twice since June 15 by 200 yuan/mt in total to 3,500yuan/mt by June 23, reflecting persistent weakness in China domestic cargoes as inventories continued to grow while buying interests from traders and downstream buyers began to thin.

Benzene inventory increased by 8.9kt week on week to 230.5kt in East China ports on Jun 24, according to data released by CCFGroup.

There are still many ships waiting for discharge in East China ports, including China domestic cargoes, due to tight space in East China tanks. Looking ahead, the China domestic/CFR China arbitrage window remained opened, the cargo inflow would likely to continue. The inventory level would keep at high level.

By June 23, H2 July benzene in East China was 3,605yuan/mt, and CFR China benzene at $425/mt (3,435yuan/mt on RMB parity, import tariff at 1.2%). The spread was around 170yuan/mt.

PetroChina Dalian Petrochemical plans to restart its 140kt/year benzene unit in late June. Sinopec Tianjin Petrochemical plans to restart its 550kt/year benzene unit in early July.

Downstream buyers were more cautious and slowing down to buy to control raw material stocks. Spot availability was ample and buyers could easily get spot cargoes if they take cargoes back from ports. And some chose to consume their feedstocks. In major downstream derivatives, operating rates have shown signs of decreasing.

*Unit of operating rate: %, updated to 19-Jun

Operating rate of CPL plants increased recently, but the further increase would be limited. Aniline operating ate increased but was expected to decrease in July as Wanhua Chemical will shut its 360kt/year and 180kt/year aniline units in Yantai, Shandong province in early July for around 45 days of maintenance. Jiangsu Yancheng Haili Chemical also delayed the restart plan of its CPL and aniline units. Zhejiang Petroleum & Chemical plans to start its 400/250 kt/year phenol/acetone unit in July. However, benzene sales of ZPC would be still around 300kt in July.

Phenol operating rate decreased recently. Shanghai Cepsa Chemical shut its 250kt/year unit on June 18 for around 30 days of maintenance. Sinopec-Mitsui Chemical will shut its Shanghai 250kt/year unit during June 28-August 23 for maintenance. Sinopec Sabic Tianjin Petrochemical will restart its 220kt/year unit in July.

Styrene operating rate decreased as well as persistent strength in ethylene prices pushed margins into negative territory. Shandong Yuhuang Chemical shut its 250kt/year SM unit on June 18 amid poor economics, and the restart date has not been decided. Ningbo Keyuan Plastics delayed the restart of its two styrene units to late July. The 80kt/year and 120kt/year units were shut on May 15 for maintenance, and originally planned to restart in end June. Anhui Haoyuan Chemical also has plans to lower run rate at its 260kt/year SM unit due to cost pressure.

In short term, benzene market is expected to keep weak given high port inventory level & ample supply but slowing demand.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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