Recently, tensions in the Middle East have escalated again. An attack on Riyadh Airport in Saudi Arabia resulted in 12 deaths and 309 injuries. US President Trump stated that the United States "may" join Saudi Arabia in strikes against the Houthis. Meanwhile, Houthi forces continue to target Saudi energy and other infrastructure. Consequently, crude oil prices rose in the over-the-counter market on October 11, providing significant support to domestic pure benzene and hydrogenated benzene prices. On October 10, Shandong hydrogenated benzene closed at RMB 10,450/ton, while Shandong pure benzene traded between RMB 10,450–10,500/ton on October 11.
There is a severe disconnect between recent crude oil futures prices and the actual situation in the Middle East, with some physical crude oil prices approaching USD 150/barrel.
Geopolitical events continue to exert cascading effects on the domestic hydrogenated benzene and pure benzene markets.
I. Low Pure Benzene Inventories in East China Create Conditions for Short Squeezing
The core contradiction in the current pure benzene market lies in extremely low inventories at East China ports. As of October 8, sample commercial pure benzene inventories at Jiangsu ports had fallen to approximately 53,000 tons, representing a historical low and the lowest level of the year. Tight liquidity of port supplies in East China has provided opportunities for bulls to push prices higher through short squeezing.
Entering October, futures contracts for pure benzene and styrene hit their daily upper limit on the first trading day, significantly boosting spot market sentiment. Shandong hydrogenated benzene shipment prices rose to RMB 10,400/ton, while Sinopec’s posted price for East China pure benzene was implemented at RMB 10,600/ton. Given that port inventories have not yet reached an inflection point and subsequent arrivals are limited, pure benzene valuations are expected to rise further.
II. Hydrogenated Benzene Profits Recover but Operating Rates Contract; Supply Remains Tight
The profit performance of the hydrogenated benzene industry warrants attention. This week, profits for Shandong hydrogenated benzene recovered to RMB 500/ton, showing clear improvement compared to earlier periods. The recovery in profits is driven by two main factors: first, rising pure benzene prices have pushed up hydrogenated benzene prices; second, raw material (crude benzene) prices remained relatively stable around the National Day holiday, widening the spread between crude benzene and hydrogenated benzene and thereby increasing profit margins.
However, it should be noted that improved profitability has not led to a simultaneous increase in operating rates. This week, the hydrogenated benzene operating rate declined rather than increased, dropping by 0.47% to 55.03%. Reasons for the persistently low operating rates include: several units are undergoing reduced production or shutdowns, limiting overall capacity utilization; although profits have recovered, enterprises remain cautious about future prospects because crude benzene price increases lag behind those of hydrogenated benzene, reducing willingness to restart operations; additionally, the hydrogenated benzene sector is small, accounting for only about 20% of total domestic pure benzene supply, giving it limited pricing power in the market.
Regarding the spread between crude benzene and hydrogenated benzene, this week saw further expansion. With limited volatility in raw material prices, hydrogenated benzene producers retain certain cost-control advantages. However, if crude benzene prices subsequently catch up with pure benzene, the spread may face narrowing pressure, potentially leading to renewed contraction in hydrogenated benzene profits.
III. Downstream Essential Demand Persists; Watch for Procurement Opportunities Amid Differentiation
| Product | Oct 8 | Sep 30 | Change (%) |
|---|---|---|---|
| Styrene | 64.44% | 63.19% | +1.25% |
| Phenol | 88.90% | 88.50% | +0.40% |
| Caprolactam | 71.87% | 71.64% | +0.23% |
| Aniline | 87.68% | 87.63% | +0.05% |
| Adipic Acid | 73.40% | 74.00% | -0.70% |
Data Source: Chempricehub
On the downstream demand side, the weighted average operating rate for major pure benzene derivatives rose month-over-month. By product:
Overall, most major downstream sectors increased their loadings, with only adipic acid experiencing a slight decline in capacity utilization. For purchasers of pure benzene and hydrogenated benzene, the margin-squeezing effect of high raw material costs cannot be ignored, and downstream procurement remains focused on essential demand.
IV. Hydrogenated Benzene Prices Expected to Remain High in the Short Term
Cost Side: Geopolitical conflicts in the Middle East are unlikely to subside in the short term. Continuous attacks by Houthi forces on Saudi energy infrastructure pose persistent supply risks. International oil prices will likely remain elevated, maintaining the cost-support logic for pure benzene.
Supply Side: Hydrogenated benzene operating rates remain low, with limited incremental supply from restarts in the short term. Pure benzene port inventories in East China are at historic lows, and import arrivals are constrained, sustaining a tight supply landscape.
Demand Side: Downstream operating rates are suppressed by profit pressures. Losses in styrene drag on demand growth, but essential demand for phenol and other derivatives remains stable. Overall demand continues to reflect essential consumption levels.
In summary, supported by both low inventories and geopolitical risks, pure benzene and hydrogenated benzene prices are expected to remain firm and elevated in the short term. While hydrogenated benzene benefits from profit recovery, any potential increase in operating rates could exert downward pressure on prices; however, releasing additional supply will take time.
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