Can benzene market sustain upward momentum?

Benzene price has been rising since mid-Apr as the spot price in East China has reached 8,920-8,930/mt as of May 6, increasing more than 7% from 8,300yuan/mt. The increase is mainly contributed by the alleviation of epidemic, recovery of some demand, high price of crude oil and higher cost of imported cargoes caused by great depreciation of renminbi. Therefore, part of the demand has transferred to China local market.

Some downstream plants cut production with the repeated COVID-19 infections of China in Apr, but most units are running normally and there is also driving force of new demand, so the inventory at ports starts to decline. By late Apr, there is limited supplement of imported goods, but due to increasing restocking for May Day holiday, there is faster destocking at ports.

The spread between domestic and imported ethylene has been widening since the beginning of the second quarter, which has peaked at 1,500yuan/mt and dips recently, but still above 500yuan/mt. Now the price of ethylene on the basis of CFR Northeast Asia is taken for reference in the calculation of styrene profit and according to the import price, the loss of styrene is generally at 500-600yuan/mt or even more. There are more rumors about production cut by styrene plants, but we have not heard confirmed news about reducing production or shutdown of the units. It can be seen that ethylene units of different technology have emerged on large quantity in recent years and the supply in China has been increasing. RMB price in increasingly adopted in the settlement of ethylene and based on the nomination of ethylene by Sinopec, styrene units can be running without losses or minor deficits, so there is strong upward momentum for benzene.