Introduction: Recently, the domestic hydrogenated benzene market has experienced a strong upward trend. The operating range in Shandong region jumped to 6,550–7,400 yuan/ton, with the price center significantly higher than last week. Market inquiry activity increased, and under the resonance of multiple bullish factors, the seller's market is clearly dominant.
The trigger for this rally can be traced back to July 3, when Sinopec raised its pure benzene listing price by 200 yuan/ton. This move set the strong tone for the week and directly boosted confidence in the pure benzene and hydrogenated benzene spot markets. Subsequently, the general upward atmosphere in the commodity futures market further injected strength into the market, and the rise in pure benzene futures provided solid support for spot prices.
Entering this week, the international energy market added new variables. The geopolitical situation in the Middle East tightened again, and international crude oil prices oscillated higher. This not only raised the cost center for pure benzene but also significantly improved market participants' risk appetite and trading sentiment. End-user downstream raw material inventories were low, and traders' restocking inquiries recovered actively.
Below, we analyze the core driving forces behind the rise of domestic pure benzene and hydrogenated benzene.
I. Resonance of Tightening Domestic Pure Benzene Supply Expectations and Costs
Multi-dimensional Tightening, Prominent Regional Structural Contradictions
Petroleum benzene supply contraction: This week, the operating rate and output of petroleum benzene declined, directly reducing the overall supply of domestic pure benzene. As a substitute and pricing benchmark for hydrogenated benzene, the reduction in petroleum benzene supply opened up room for hydrogenated benzene prices to rise.
Sustained depletion of East China port inventories: Pure benzene inventories at East China ports have been declining for several consecutive weeks, with spot resources available for circulation becoming tight. More critically, a typhoon is expected to make landfall in the southeastern coastal areas of China around July 11 (this Sunday), which will directly affect vessel operations at major East China ports. As a result, arrivals of imported and domestic cargoes will be delayed. It is expected that next Monday (July 13), East China port pure benzene inventories will continue to decline, with market forecasts dropping to a low of around 50,000 tons. The extremely low port inventory levels will further intensify concerns over short-term supply gaps.
Northern refinery production cuts and disrupted arrivals in East China: Production cuts and shutdowns at some northern refineries, combined with disrupted arrivals in East China due to the typhoon, have created regional supply fragmentation and tightness. The supply-side narrative has been fully played out this week, providing factories and cargo holders with the greatest confidence to push up quotations.
Low Downstream Raw Material Inventories, Chasing Higher Prices Mood Triggered
In contrast to the tightening supply, downstream demand did not see a significant increase, but downstream raw material inventories were low, and the mood to chase higher prices and restock was good. Among major downstream products, the capacity utilization rates of aniline and caprolactam increased, maintaining just-in-time procurement of pure benzene. For other products (such as styrene, phenol, etc.), capacity utilization rates declined, but overall demand remained relatively stable. Moreover, after previous consumption, some downstream enterprises with just-in-time needs had reduced their raw material inventories to low levels. Facing continuous price increases, downstream had a passive restocking demand driven by a "buy rising, not falling" mentality, and some buyers were forced to chase higher prices and close deals to ensure production supply. This, in turn, further consolidated the upward momentum of the market. Additionally, in a clear upward trend, some traders actively entered the market to replenish, amplifying market volatility and increasing spot liquidity, thereby boosting transaction volumes.
New Changes in Middle East Situation, Crude Oil Strengthens
The rise in crude oil triggered by the tightening geopolitical situation in the Middle East directly raised the cost expectation for pure benzene and also boosted the trading sentiment of the entire energy-chemical sector from the external environment.
II. Changes in Hydrogenated Benzene Profit and Operating Rates
With the increase in hydrogenated benzene prices, the processing profit of hydrogenated benzene companies has improved significantly, mainly because the rise in Shandong crude benzene was less than that of hydrogenated benzene, leading to a widening of the crude benzene-hydrogenated benzene spread. Profits for hydrogenated benzene enterprises in Shandong have recovered. Chempricehub data on July 9 showed that the profit for hydrogenated benzene enterprises in Shandong was 405 yuan/ton, reaching a new high in nearly two months.
Units that were shut down in June are gradually coming back online in July. The operating load and output of hydrogenated benzene units have increased. Chempricehub data on July 9 showed a domestic operating rate of 64.07% and weekly hydrogenated benzene output of 85,000 tons. In the short term, due to the lagging increase of feedstock crude benzene and the scale of hydrogenated benzene, the increase in operating rate is not yet sufficient to reverse the tight supply pattern.
Although pure benzene and hydrogenated benzene prices have risen, the profitability of most downstream products (except aniline) has been squeezed. If end-user demand fails to keep up, downstream acceptance of high-cost raw materials will gradually weaken, which may be a risk point to watch in the future market.
Market Outlook
Under the strong expectation that East China port inventories will drop to a low of 50,000 tons, the tight supply situation cannot be effectively alleviated before the typhoon passes. Refineries and hydrogenated benzene plants have no inventory pressure and their price support mentality remains strong. However, attention needs to be paid to the ability of major downstream products to absorb high-priced pure benzene. If downstream losses intensify, the expansion of production cuts will lead to demand contraction, thereby putting pressure on raw material prices. Additionally, after the typhoon passes in East China, any signs of easing in the Middle East situation after the 11th could trigger a correction in crude oil prices, thereby weakening cost support for pure benzene. The domestic pure benzene and hydrogenated benzene markets may face a risk of a pullback from high levels.
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