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Insight | Time:Nov 20 2017 10:54AM
China's benzene market to weaken on ample supply
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Benzene inventory in East China ports decreased gradually since late October. By November 15, the inventory level was at 151.5kt, down about 8.5% from late October.

*CCFGroup publish benzene inventory in East China ports (mainly in Taizhou, Changzhou, Jiangyin) every Wednesday. The figure reflects the inventory level held by traders.

The decline was mainly due to wide CFR China/domestic benzene price spread and the opened arbitrage window from Asia to US Gulf Coast. Chinese end-users preferred buying lower domestic materials. According to the preliminary date of China Customs, benzene import was 179kt in October, down 47kt from September import. Meanwhile, the closed arbitrage window of coal-based benzene from Shandong to Jiangsu also help reducing inventory level in East China port.

However, the current inventory level was still seen as high, which continued weighing on domestic prices. In addition, Zhongjin Petrochemical was expected to restart its 490kt/year benzene unit, and Sinopec Jinling Petrochemical was scheduled to get products at its new 100kt/year unit. As a result, the decrease in port inventory might likely slow down.

CFR China benzene prices remained higher than domestic level since August, and reached around 200yuan/mt in early October. The Asia-US arbitrage window was opened, as supply tightness in USGC pushed FOB Korea USG prices higher. However, the tightness was likely to ease in December 2017, Asian suppliers might turn their attentions to Chinese market.

Looking ahead, with the restart of Zhongjin and startup of Jinling Petrochemical, and the turnarounds of SP Chemicals SM unit and Ningbo Wanhua's aniline unit, overall benzene supply in domestic market would keep ample. The reduction in benzene port inventory is likely to slow down. This could weigh on domestic benzene prices. Eyes could rest on Qingdao Haiwan Chemical's 500kt/year SM unit which was expected to start in December 2017.
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