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Benzene supply decreases on surging costs

2022-03-22 08:04:55 CCFGroup

Crude oil and naphtha prices surged after Russia launched war again Ukraine. On top of that, petrochemicals increased but the rises were less than that of oil and naphtha. Brent for May delivery was $112.67 a barrel and CFR Japan naphtha price was around $1,019.6/mt. Naphtha crack reached around $305/mt in early March, hitting around 10 years high. However, ethylene-naphtha spread has narrowed to around $177/mt, and propylene-naphtha spread to around $172/mt. Margins for olefin downstream products also turned negative. As a result, some naphtha steam crackers have lowered operating rate.

Plant	Ethylene capacity, kt/year	Cracking rate cut
Sinopec ZRCC	1,200	#2 cracker down to 80%
Sinopec Yangzi	700	#2 cracker t/a Mar 15; #1 cracker t/a Mar 28
Shanghai SECCO	1,000	87%
Sinopec-Sabic Tianjin	1,200	83%
Sinopec Yanshan	800	77%
Sinopec Qilu	800	70%
Gulei Petrochemical	800	70%
Zhongke Refining	800	85%
Sinopec Maoming	1,200	75%
Sinopec-SK Wuhan	1,100	72%
Zhongyuan Ethylene	200	70%; to shut for t/a

Given the rate cut of those naphtha crackers, monthly output loss of benzene is estimated at around 50kt.

In addition, some producers in South Korea have also lowered operating rate given rising naphtha prices. Naphtha import from Russia account for around 32% of total naphtha imports of South Korea. After the rate cut, benzene exports of South Korea are likely decrease. Some units in Southeast Asia may also lower output.

FOB Korea benzene prices have been around 600-700yuan/mt higher than China domestic level. China's April benzene imports are expected to decrease.

Given the output reduction in both China domestic market and Asian market, overall benzene supply has gradually decrease.

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