CPL supply and demand shows a marginal weakening trend toward October

As shown in the above figure, CPL plants under maintenance are scheduled to restart and increase the run rate at the end of September, in order to avoid being affected by the National Day holiday. Similarly, the new capacities of Hunan Petrochemical and Shenyuan will also start trial production before the holiday. Undoubtedly, this will greatly increase the overall CPL supply in the market.

In terms of regional distribution, the supply-demand relationship in Fujian (South China) has weakened due to the operation of the new 300kt/year CPL plant by Eversun since June 2023. But since Eversun has also expanded its capacity for nylon 6 chip by 70kt/year at the same time, and another local large CPL producer Tianchen has reduced its production since September. In addition, both buyers and sellers have intended to accumulate some inventory due to a bullish market outlook from July to September. This has prevented outflow of CPL supply from Fujian province.

However, since the end of September, the bullish outlook has gradually changed. Tianchen's CPL plant has resumed supply, and the new device from Shenyuan is expected to start up soon. Therefore, it is anticipated that CPL supply from Fujian will significantly increase in the fourth quarter, with the target market being mainly East China.

In addition, Hunan Petrochemical has planned to start trial production of its new CPL plant at the end of September, and effective supply is expected to be formed in October. Although the production of supporting cyclohexanone will be later, and there will be nylon 6 production matched as well, the unavoidable increase in CPL supply will put additional pressure on the limited purchasing power of the surrounding areas in Hunan province. Consequently, the surplus CPL will eventually flow to East China.

In North China, apart from Dongming Risun and Luxi Chemical's 100kt/year line, all supplies in the northern region will be running normally after Yangmei restarts its production in end-Sep. Coupled with the incremental supply from Fujian and Hunan, CPL supply in East China in October is expected to be unusually sufficient, from a numerical statistic perspective or the subjective perception of the author.

Last week (Sep 18-22), it was mentioned that the supply-demand situation in benzene market is not weak, but the absolute price will be greatly influenced by fluctuations in styrene. Currently, crude oil prices are still relatively strong in the short term, so it is difficult for benzene to experience a significant retreat in October. This implies that the continuous compression of CPL processing fees based on benzene will become more prominent in October.