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Insight | Time:Nov 27 2017 2:55PM
China's benzene firms, upward room limited
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China domestic benzene prices moved up since mid-October, along with the rise in international benzene prices, particularly the rise in FOB USGC price. Sinopec had revised up benzene listed prices for five times by 500yuan/mt in total to 6,700yuan/mt ex-works. Sinopec is the largest benzene producer in China, with capacity taking up to nearby 30 percent of China's total benzene capacity, including coal-based benzene capacity.

Sentiment in Asia, including China's market, was boosted by the rise in US market. FOB USGC benzene prices moved up aggressively since mid-October on supply tightness. The arbitrage window from Asia and US was opened, while US imports from Asia remained low on delayed loading from Asia. Some market participants said December benzene contract prices were expected to settle higher than 310 cents/gal, as December spot prices have remained above that level for most of November.

Firmer crude oil futures and downstream styrene monomer were also supportive to Asian benzene market. However, China's benzene prices moved up slightly last week amid slight domestic demand. By November 24, CCFGroup East China benzene price index was 6,750yuan/mt, with discussions at 6,700-6,800yuan/mt ex-works. The price levels were unable to catch up with the international market price and kept the South Korea-China arbitrage closed.

Benzene inventory rose 5.2kt week on week to 156.7kt in East China port on Nov 22, according to data released by CCFGroup. The high inventory level provided domestic buyers with ample cheaper materials. CCFGroup publish benzene inventory in East China ports (mainly in Taizhou, Changzhou, Jiangyin) every Wednesday. The figure reflects the inventory level held by traders. Recently, discussions of coal-based benzene remained firm, leaving the arbitrage window from Shandong to Jiangsu closed. Coupled with higher import prices, benzene port inventory was expected to decrease.

In demand side, no clear buying increment could emerge in December. Qingdao Haiwan Chemical was heard to start test run at its 500kt/year styrene monomer unit using ethylbenzene. And the company was expected to buy benzene once the unit runs smoothly. However, according to a source related to the company, the startup was likely to be postponed on strict environmental regulations, and the exact date of start was not confirmed.

In general, low import demand and closed arbitrage window of coal-based benzene could held consuming domestic benzene inventory. Sentiment could also be supported by the rise in FOB USGC and Korea prices. However, the high inventory level could still limit the upward in domestic market. Eyes could rest on US market and inventory changes in East China ports.
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