Benzene market weakens, yet further decline appears limited

Sinopec reduced its benzene listed price by 150 yuan/mt to 8,700 yuan/mt on February 26, marking the company's first price reduction since late December 2023.

Since early December 2023, domestic benzene prices in China have risen due to a tight supply-demand balance. In January, some benzene producers ramped up production, encouraged by a favorable BZ-Naphtha spread, though the overall increase was modest. Inventories at East China ports remained low, with imports falling short of expectations amid higher international prices and strong downstream demand.

However, benzene prices began to decline in late February, following the end of a short squeeze. This occurred as traders actively sold at peak prices to secure profits in light of a softening supply-demand dynamic.

Domestic production units maintained steady operations in late February, unchanged from the period before the Chinese New Year holiday. Sinochem Quanzhou is slated to resume normal operations in March after a two-month slowdown. Shenghong's CDU operating rate saw a slight reduction, affecting downstream reformers minimally, with no significant changes observed in other units.

Downstream sectors provided considerable negative feedback. Zhejiang Petrochemical's Phase I phenol plant was shut down, and Mitsui is planning further rate reductions at its phenol unit in March. Zhongxin is restarting Phase II but plans to shut down Phase I, while PC Jilin is heading towards permanent closure. In the styrene sector, facilities like Hengli and Baofeng have ceased operations, with Haoyuan and Hainan scheduling shutdowns by the end of the month. Guangdong Petrochemical is looking to increase its rate, whereas Sinochem Quanzhou plans a reduction. In the aniline sector, Wanhua, Fuqiang, and Huatai are planning March shutdowns. Consequently, the overall downstream operating rates have dropped compared to the previous month, alleviating some of the immediate pressure on benzene. With maintenance scheduled in April by both domestic and international producers, a reduction in benzene supply is anticipated, while high import prices are likely to quickly narrow the monthly benzene spread.

Fundamentally, from late February, operating rates for both styrene and phenol are expected to decline, slightly weakening benzene demand. Despite active profit-taking shipments, the outlook for March and April suggests limited potential for further price drops, supported by high import costs and sustained strong downstream demand.