Benzene market weakens, but May supply/demand structure to improve

Benzene prices decreased on Monday along with the declines in downstream styrene monomer. As of Monday close, East China benzene decreased by 160yuan/mt from last Friday to 8,745yuan/mt.

Several units resumed operations this week, including ZPC's reformers. In the coming days, additional restarts are expected at ZPC's reformer, aromatics, and Hengli TDP units. Conversely, Fuhai planned to shut down, indicating that changes in benzene operations will be limited. On the demand side, CPL/adipic acid, styrene, and aniline units continued to increase their operating rates, aiding the recovery of downstream processing margins.

As of May, the benzene market is in a de-stocking phase. Refineries are undergoing intensive maintenance in China, resulting in the highest level of benzene supply loss for the year. Despite these maintenance reductions, the longer days in May are expected to boost benzene supply by approximately 80kt. On the demand side, while there are some maintenance-induced losses. However, it is anticipated that the total demand volume for May will increase by about 130kt compared to April.

Currently, benzene prices are at an absolute high, creating resistance to further price increases. With an expected return of more benzene supply in June and considering the general profit levels of downstream units, upward price movements are likely to be limited. The market should closely watch the prices of crude oil and other aromatics, particularly the significant influence of downstream styrene prices. Styrene units that were under maintenance in April are beginning to restart towards the end of May, expected to result in a noticeable increase in production month-over-month. By late May, styrene inventory levels might start to accumulate, potentially increasing resistance to price surges and possibly impacting benzene prices downward.

However, demand for benzene in May is showing signs of an increase, and a narrowing of the price difference between styrene and benzene is highly probable. Additionally, with benzene units coming back online from maintenance in June, there is an increased likelihood of a widening spread between May and June prices.