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Insight | Time: Dec 12 2019 8:53AM
China's benzene recedes after rising, short-term availability still tight
 
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China's benzene market posted strong upward move since early December 2019 on continuous decrease in port inventory in East China main ports, despite the weakness in downstream derivatives. CPL cash flow has been in the negative territory for about a month, and styrene monomer price was around the break even line.

Asian market also moved up significantly this week as traders in the market continued to support prices through aggressive bidding. The gain was mainly due to low inventory level in East China and continued tightness in the Northeast Asian market. The aromatics unit rate cuts have left producers with low inventories. Rate cuts at several plants were heard over the second half of 2019, as the PX-naphtha and benzene-naphtha spreads were under pressure, resulting in narrow margins across the key aromatics products.

Sinopec revised up benzene listed price twice since early Dec by 550yuan/mt in total. The current listed price was 5,750yuan/mt. The market was also buoyed by the price hike of Sinopec.

However, the market retreated slightly in the afternoon after days of increase, tracking the decrease in FOB market and falling downstream styrene monomer prices. Purchase for coal-based benzene in Shandong decreased as Yuhuang shut its 200kta SM unit. Due to Chinese New Year holidays, demand from isolated to H1 January and February-arrival benzene.

MARKET FUNDAMENTALS



In fundamentals, benzene inventory level fell to around nearly two-and-a-half-year low Wednesday. The inventory decreased by 6.5kt from week on week to 85.6kt in East China ports on Dec 11, according to data released by CCFGroup. The level was last lower in end June 2017, when it was reported at about 82.5kt.

Firmness in naphtha market remains a concern, with narrow margins of PX and benzene over H2 2019 resulting in rate cuts at various plants in Northeast Asia.

In terms of domestic supply, Zhejiang Petrochemical is expected to achieve on-spec benzene soon. And before the startup of downstream styrene unit and phenol/acetone, the company could have some commercial volumes to sell. While in the early stage, the reformer would be running at low rate.

The company has the capacity to produce 1.29 million mt/year of benzene, equipped with a 1.2 million mt/year styrene and 400,000 mt/year phenol/acetone unit. Based on nameplate capacities, the plant would not need to procure or sell additional volumes of benzene.

Uncertainties remain in downstream market. Several styrene units were unexpectedly shut down due to unit issues. Meanwhile, market participants also worried that the poor economics might affect plant operations.
[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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