Shandong aromatics prices decline sharply

Since mid-September, the prices of aromatics in Shandong have been continuously declining, with a much larger drop compared to the East China market.

From September 18 to October 20, the price of toluene in Shandong fell by 9.8%, while in East China, it dropped by 5.9%. The price of mixed xylenes in Shandong decreased by 9.8%, compared to a 6.4% decline in East China. The price of benzene in Shandong saw a decline of 12.4%, while in East China, it fell by 7.3% over the same period.

On one hand, stocking demand prior to the National Day holiday in the beginning of Oct fell short of expectations. Earlier, from July to August, gasoline blending demand in this year's remained persistently weak. In September, Shandong refineries still struggled to balance production and sales, while downstream oil product procurement interest remained subdued. Refineries reduced prices to destock, leading to continuous price declines. After the holiday, downstream restocking demand remained relatively sluggish.

On the other hand, supply in the Shandong market has been ample. In September, Dongming Petrochemical's previously idled units resumed operations. In late September, Henan Fengli's new reformer started feedstock intaking, while idled units such as Zhenghe and Huaxing are scheduled to restart in October. Other local refineries operated without shutdowns or production cuts, keeping the overall output of benzene, toluene, and MX in Shandong at high levels.

Meanwhile, although the East China market also experienced a downtrend, toluene was supported by export demand, and MX was underpinned by PX demand, coupled with lower arrivals in the USD-denominated market and low port inventories. As a result, the declines in toluene and MX prices in East China were relatively moderate.

The decline in benzene in Shandong was the largest among the three aromatics products. In addition to supply-side increases similar to those of toluene and MX, the shutdown of Chambroad Sidarui's 670,000 mt/yr styrene unit for maintenance starting October 10 significantly impacted local benzene demand. With weak buying interest, benzene producers continued to lower prices to boost sales.

Currently, PX margin based on MX in Chines yuan remains healthy. Shenghong and Weilian Chemical continues buying MX as feedstock supplement. However, the support from PX is limited, and if gasoline blending demand remains slack, it would be difficult for toluene and MX price to rally.