China's Sep benzene import stays high, prices under pressure

According to data released by China Customs, China imported 423 kt of benzene in September 2024, up 15.9 kt or 3.91% month on month, and up 89.9 kt or 27% year on year. In the first three quarters of 2024, benzene imports totaled 2.92 million mt, an increase of 16.72% compared to the same period last year.

Benzene imports in August exceeded the 400 kt mark for the first time since November 2022, and imports continued to rise in September as China's benzene prices remained the highest among major markets for much of the time since the second half of August.

The higher prices in China attracted surplus benzene imports from various regions. With the Asia-to-USGC arbitrage window closed, a significant amount of Korean benzene has been redirected to the Chinese market. In the first half of the year, monthly shipments of Korean benzene to the U.S. Gulf Coast averaged around 80-90 kt, but by Q4, this figure had dropped to about 10-30 kt. This 50-80 kt decline has shifted towards sales in China. As a result, China's monthly benzene imports in Q4 have averaged over 400 kt, an increase of approximately 80 kt compared to the monthly average in the first three quarters.

Benzene inventory in East China ports increased by 38 kt to 109 kt as of October 23, according to data from CCFGroup.

In addition to high imports, domestic supply in China remains elevated. The operating rate of coal-based benzene (benzole hydrogenation process) units reached about 56% on October 18, up about 9% from the end of September.

The fourth quarter will also see more new capacity than downstream derivatives. Yulong Petrochemical started one reformer at the end of September and achieved on-spec benzene in mid-October. Yulong is expected to start its cracker in the second half of November, which will further increase benzene output. The combined capacity of the reformer and cracker is approximately 400 kt/year. Sinopec-Ineos Tianjin Petrochemical planned to start its cracker in October, which has a capacity to produce 1.2 million mt/year of ethylene and 180 kt/year of benzene. However, the status of this project is currently unclear, and further updates are needed. Meanwhile, there will be no significant additions to downstream capacity, except for a 450 kt/year styrene unit from Hongwei Chemical.

Last week's sharp price declines largely absorbed the market's weak supply-demand dynamics. However, in the short to medium term, the supply-demand balance is unlikely to push prices upward. Market attention will remain on macro factors, including crude oil developments.