China's benzene market keeps firm on good demand

Sinopec increased benzene listed price by 200yuan/mt on July 19. After the adjustment, all marketing branches of Sinopec quoted up to 6,800yuan/mt. Sinopec has revised up benzene listed price several times since early July by 600yuan/mt in total.

China domestic benzene market moved up since the beginning of July and the performance was quite strong this week, as the demand was better than previous expected. The rises in upstream oil/naphtha prices and the downstream styrene spot/futures prices also lent strong supports to benzene market.

Last week, the operating rates of CPL and phenol units recovered with unit restarts. The average rate for CPL units increased by 4% to 76.5% as of Friday and of phenol units by 4.1% to 69.8%. The profitability for CPL was weak but producers could still have meager profits. There has been no clear signs for phenol units to cut rate or shut due to the negative cash flow.

As for styrene, Shanghai SECCO restarted its 700kt/year unit on July 18. Tianjin Dagu shut its 500kt/year unit on July 18. Lihuayi has resumed production at its 720kt/year unit after short closure. Shandong Yuhuang has restarted one 250kt/year unit for EB production. SP Chemical plans to restart its 320kt/year unit in end-July and Ningbo Keyuan also plans to restart its 150kt/year unit in end-July. Shuangliang Leasty will restart one 200kt/year unit in end-July.

Although the recovery of styrene output would be lower than expected due to the EB demand for gasoline blending, the demand for benzene sustained.

Benzene demand was also good in Shandong. The buying tenders in Shandong continued to increase. As a result, benzene cargoes were partly moved from Jiangsu to Shandong, and then buyers in East China turned to seek cargoes in ports.

China's benzene imports are expected to increase in August with the possible opened arbitrage window, considering the strength in China and the closed Asia-USGC arbitrage window. However, the overall supply-demand structure will be still good in August.

In short term, benzene prices are expected to track the rise of styrene. However, the spread between styrene and benzene is likely to keep widening, as the improvement of benzene supply-demand structure is not that good as styrene.