Lead: The low inventory in East China's storage areas triggered a strong price rebound this week, but Shandong's supply-demand balance is turning looser, widening the price spread with East China.
During this cycle, East China's benzene market prices stopped falling and rebounded, with the negotiation focus moving higher than last week and the low-end price rising notably. The mainstream spot negotiation range was 7,470–7,890 yuan/ton. On the cost side, crude oil prices stabilized, providing underlying support for benzene. Affected by typhoons, the arrival of imported cargo was delayed, and port inventory in East China continued to decline, intensifying the short-term tightness in spot supply and strengthening the port spot basis. Spot transactions during the week were mainly replenishment by contract traders, while downstream end-users remained cautious in procurement. After the typhoon passed, the number of imported cargoes arriving at ports increased, weakening the supporting effect of low benzene inventory on prices. With expectations of a marginal loosening in supply and demand in the medium term, the upside for spot prices is limited.
The East China–Shandong price spread widened this week, with the weekly average spread expanding to 223 yuan/ton, the widest level since early July. During the cycle, East China traded on the low port inventory caused by typhoon-related vessel delays, while Shandong traded on recovering regional supply and falling demand. During the week, Shandong Weilian restarted benzene shipments, and neighboring Shenghong Petrochemical was also in the process of restarting, with supply around the Shandong region continuing to recover. On the demand side, the Shandong market faced downstream reductions including Wanhua's aniline and phenol turnarounds, as well as Lihuayi's styrene turnaround next week, indicating a declining demand trend ahead. Therefore, Shandong's supply-demand balance is expected to lean toward ample supply, with insufficient upward price momentum, widening the spread with East China.
The above pattern of rising supply and falling demand is not limited to the Shandong region. On a national basis, with recent restarts at Zhejiang Petrochemical, Shenghong Refining, and Zhongjin Petrochemical, along with the return of Sinopec Yangzi and Hainan Refinery in the latter half of September, domestic benzene is set to enter a two-month capacity utilization recovery cycle starting from mid-July, ultimately reaching levels seen in the same period last year and before the conflict. In contrast to benzene, where production is highly certain, downstream sectors are more affected by industrial margins. Due to prolonged theoretical losses, all five major downstream industries are operating at relatively low utilization rates. In the first and second weeks of August, the weighted downstream capacity utilization rate was 62.6%–63.2%, below the July average of 63.5%, the June average of 66.0%, and the May average of 68.7%. On the same basis, in the first and second weeks of August 2025, the weighted utilization rate was 73.9%–75.3%.
At present, absolute inventory levels remain low, providing some support to East China prices. However, over the longer term, the current situation of recovering supply, subdued demand, and a positive supply-demand gap will continue to exert downward pressure on prices.
Admittedly, the Middle East situation remains the primary factor determining the longer-term supply direction. Should US-Iran conflict escalate repeatedly and passage through the Strait of Hormuz be disrupted for an extended period, expectations of looser benzene supply could be temporarily reversed, driving prices up from low levels. However, market concerns over weak demand have outweighed concerns over supply shortages. Short-term conflict in the strait is unlikely to change the trend toward looser supply-demand conditions, and the market has become somewhat desensitized to repeated fluctuations in US-Iran tensions. At present, the core factor driving market trading remains the supply-side loosening expected from August to October, with prices expected to fluctuate downward overall.
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