Lead-in: Last week, the domestic hydrogenated benzene market surged significantly, with spot prices peaking at approximately 9,600 RMB/ton, marking a new high for the year. Geopolitical tensions continued to escalate, pushing Brent crude back above $100/barrel. Combined with declining East China port inventories of pure benzene and styrene, these factors boosted market sentiment. Subsequently, as crude oil pulled back from its highs and profit-taking occurred, hydrogenated benzene prices retreated from their peak.
I. Crude Oil Leads Gains; Hydrogenated Benzene Hits Year-to-Date High
Affected by ongoing geopolitical tensions, concerns in the crude oil market intensified again. On September 9, Brent crude futures reclaimed the $100/barrel level for the first time since July 24, with crude oil trends gradually exceeding market expectations. As a key cost driver for both pure benzene and hydrogenated benzene, rising crude oil prices directly bolstered market sentiment.
Meanwhile, East China port inventories for pure benzene and styrene declined and remained at generally low levels, further exacerbating expectations of tight spot supply. On September 10, pure benzene hit its daily limit up on the futures exchange, and spot prices for pure benzene and hydrogenated benzene jumped to approximately 9,600 RMB/ton, setting a new annual high. Bullish sentiment peaked, prompting some traders and downstream users to actively replenish stocks.
However, on September 11, plans for a diplomatic meeting between Iran and Gulf states regarding Hormuz Strait passage triggered a pullback in crude oil from its highs. With some investors taking profits, domestic spot prices for pure benzene and hydrogenated benzene fell from their peaks. Within just a few days, the market experienced sharp rises followed by steep declines, significantly amplifying volatility.
II. Petroleum Benzene Output Increases Continuously; Hydrogenated Benzene Faces Losses and Reduced Production
From the supply side, domestic pure benzene supply is expected to increase next week. Some local refineries and petroleum benzene units are restarting sequentially, leading to continued growth in petroleum benzene output. However, fewer imported cargoes are arriving, and East China pure benzene port inventories are projected to decline early next week. Low port inventories support spot prices, particularly in East China, which is the major consumption hub. The inventory drawdown will further strengthen holders' willingness to maintain firm pricing.
Regarding hydrogenated benzene, losses at coking plants and production restrictions imposed by domestic coke producers have reduced the supply of raw material (crude benzene). Tight circulating supplies caused the price of crude benzene to rise more sharply than that of hydrogenated benzene, squeezing margins for hydrogenated benzene producers. In Shandong, profits stood at -56 RMB/ton, while in Shanxi and Hebei, losses ranged from -200 to -300 RMB/ton. Five units were shut down, and five others operated at reduced loads. Since capacity reductions exceeded restarts, hydrogenated benzene operating rates and output declined on the 10th. Weekly output totaled 76,400 tons, a decrease of 8,400 tons from the previous period, with an operating rate of 57.60%, down 6.32 percentage points from the prior period. Next week, short-term shutdown units are expected to restart, leading to an anticipated increase in weekly output. Hydrogenated benzene units that had previously stopped for various reasons will gradually resume production, increasing market supply month-over-month. However, it is important to note that the increase in hydrogenated benzene output will be relatively limited, and some restarted units will require time to ramp up loads. Actual supply increments may fall short of expectations.
III. Partial Downstream Units Restart; Pre-Holiday Stockpiling Begins
On the demand side, some downstream units for styrene, phenol, aniline, caprolactam, and adipic acid have restarted, leading to a month-over-month increase in procurement demand for pure benzene. These products represent the primary consumption areas for pure benzene and hydrogenated benzene, and their unit restarts signal a gradual release of raw material purchasing volumes. Styrene, as the largest downstream product for pure benzene, sees a notable boost in pure benzene demand when its units restart.
Additionally, with the Mid-Autumn Festival and National Day holidays approaching, downstream enterprises have pre-holiday stockpiling needs. Typically, such stockpiling begins one to two weeks in advance. Next week falls within this stockpiling window, suggesting that purchasing demand may be released intensively. Under conditions where both supply and demand are growing, if the demand increment slightly exceeds the supply increment, it will provide support for prices.
IV. Short-Term Crude Oil Volatility at High Levels; Frequent Geopolitical Disruptions
From a macro perspective, events such as pipeline closures, postponed meetings, and vessel attacks continue to disrupt the market frequently. On the 14th, crude oil opened lower but rallied, gaining over 3%, indicating that geopolitical risks remain unabated. With crude oil oscillating at high levels, hydrogenated benzene, which correlates closely with crude oil, is likely to follow suit. The sustained high-level operation of the cost end makes significant downward adjustments in hydrogenated benzene prices unlikely.
Nevertheless, caution is warranted as crude oil trends have gradually exceeded market expectations, with increased volatility at high levels. Should geopolitical tensions ease or negative news emerge, crude oil could undergo a rapid correction, thereby dragging down pure benzene and hydrogenated benzene prices. Currently, hydrogenated benzene prices are at annual highs, making the market increasingly sensitive to negative news.
Outlook:
Overall, domestic pure benzene supply and demand are both expected to grow next week. However, the supply increment is projected to lag behind the demand increment. Supported by East China port inventory drawdowns and pre-Mid-Autumn/National Day holiday stockpiling demand, fundamentals remain robust. Given that crude oil is oscillating at high levels and hydrogenated benzene correlates closely with it, synchronized movement is probable. Domestic hydrogenated benzene prices are expected to fluctuate at high levels next week, with mainstream transaction prices referencing a range of 9,000–10,000 RMB/ton. Key factors to watch include Brent crude oil trends, changes in East China pure benzene port inventories, the realization of downstream unit restarts, and fluctuations in hydrogenated benzene operating rates.
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