Benzene supply-demand structure gradually improves

After a significant price increase in Q2, the benzene market saw a decline in July due to weakening supply and demand. Following a deep adjustment in July, new downstream facilities coming online in August have drawn attention, along with the repair of downstream processing margins. This has led to increased demand for benzene, with the supply-demand structure steadily improving.

Since the end of July, new downstream facilities have been gradually starting up. According to CCFGroup (Huarui Information), by October, a total of 2.14 million tons of new capacity will be released or pending release. If operating at full capacity, this would result in a monthly demand for benzene of over 150kts. The main products affected include styrene, cyclohexanone/CPL, and phenol. Currently, styrene and CPL margins remain positive, while non-integrated phenol show slight losses. Integrated phenol units can still maintain positive margins. Excluding the 35% non-integrated capacity with uncertain start-up or ramp-up, about 65% of integrated units are likely to start up or reach full capacity, adding around 100kt to monthly demand.

Benzene supply-demand (forecast)

Based on current operational and planned maintenance schedules, benzene inventory accumulated significantly in July and August. July's accumulation was mainly due to downstream companies replenishing stock, while August saw a mix of port and downstream factory restocking. August's factory restocking likely aimed to prepare for September's supply-demand adjustments. In October, static data suggests inventory reduction will continue, though less aggressively than in September. Considering the National Day holiday, there might be a preemptive increase in September's demand.

So we also see that the spot and September spread has weakened significantly. As of August 13th close, it has dropped to around 75 yuan/mt. Judging from the supply and demand situation in September, it is not ruled out that the spread may weaken further.