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Insight | Time:Dec 9 2016 3:21PM
What's behind the crazy rise in China's benzene market
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China domestic benzene market surged since November 2016. According to CCFGroup, the East China marker for oil-based benzene rose as high as 44.5% from 5,500yuan/mt on November 1 to 7,950yuan/mt on December 8. The market continued its upward move on December 9 with the discussion level up to about 8,000-8,100yua/mt ex-works, the highest level since October 2014.

China's biggest benzene producer-China Petroleum & Chemical Corporation, or Sinopec Corp, revised up benzene listed prices by 300yuan/mt to 7,500yuan/mt on December 9, marking the fifth time that Sinopec raised the listed prices in December. Sinopec has raised by 1,300yuan/mt since December 1.

In November, Sinopec raised its benzene listed prices five times by 800yuan/mt in total. The company settled November benzene contract price at 5553yuan/mt, up 253yuan/mt from its October's settlement.

PetroChina also raised benzene listed prices on December 9 by 300yuan/mt today to 7500yuan/mt in Northeast China, and 7550yuan/mt delivered from Northwest China to East China.

Market participants previously said the Q4 benzene market would be bearish, as the slack season of downstream styrene monomer would dragged down benzene prices, the start of South Korean Hyundai Chemical's 500kt/year benzene plant would raise supply and MDI unit turnaround of China's Wanhua would dampen demand for benzene.

In in fact, styrene monomer posted sharp rise as well, even better than in a peak season. Hyundai Chemical's new plant ran unstably, and no cargoes were shipped into Chinese market. Meanwhile, Wanhua changed its turnaround plan. Its Ningbo plant will undertake maintenance in turn next week.

Coal-based benzene kept a very narrow discount to oil-based since August 2016. Producers kept raising ex-works offers, while Sinopec's oil-based benzene listed prices were still lower than the market level. Some buyers in North China, who used to buy coal-based benzene, had to seek oil-based products in East China or even imported cargoes, which further tightened the supply in the market.

The rises in downstream derivatives were not so high as in benzene, but most products have sawn more than 20% rise. Downstream plants still have good demand for benzene owing to good margins.

Price assessments for downstream derivatives (unit: yuan/mt)
Product 8-Dec 1-Nov Rise
Styrene monomer 10650 8600 23.8%
Phenol 7600 6700 13.4%
Caprolactam 15300 11050 38.5%
Aniline 8900 7300 21.9%
Adipic acid 9800 8000 22.5%
Cyclohexanone 10850 8250 31.5%
Maleic anhydride 8850 6950 27.3%

Benzene spot availability was still tight and buying from downstream remained strong. In addition, Jiangsu Abel Chemical is running its 250kt/year SM plant at 80% of capacity after the start. Ningbo Wanhua will conduct maintenance at its 1.2 million mt/year MDI plant in turn. There're no turnaround plans in other products, so the overall demand could maintain good.

However, benzene supply is likely to increase in anticipation of rising operating rate of both oil-based and coal-based plants. End-user plants have received their cargoes in early December, so the procurements may slow down. In addition, more than 20kt U.S. cargoes are expected to arrive in end January and early February.

Domestic benzene market will be still supported in short term on healthy demand. While the prices could also retreat in anticipation of rising the supply and potential resistant sentiment from downstream.
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