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Insight | Time:Jan 25 2018 2:02PM
China's benzene keeps firm on favorable supply-demand situation
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Asian benzene prices jumped $39-$51/mt last week, supported by bullish sentiments and expected supply shortage in Northeast Asia due to turnaround season starting from March. The maintenance in Northeast Asian from end February onward would tighten up the market supply amid possible rebound of Chinese demand after the Lunar New Year holidays.

However, the market was mixed in late January. FOB Korea prices slipped as market participants stepped back to observe the market, with arbitrage from Northeast Asia to the US Gulf Coast and China both closed. CFR China discussion levels mainly tracked the domestic China price trends. End-users showed little interests in both CFR China and FOB Korea materials these days.

In China domestic market, Sinopec, the biggest benzene supplier in China, revised up its benzene listed price by 100yuan/mt to 7,200yuan/mt effective from January 24. The price rise had lent some support to bid/offer levels, while the overall impact on the market was limited. Currently, cash flows of downstream derivatives were favorable.

Benzene inventory increased 1.6kt week on week to 132.5kt in East China port on Jan 24, according to data released by CCFGroup. This was considered as a relatively high level, which still limited the upward room of domestic and CFR China prices. The inventory level end January is expected to inch up on more cargoes to arrive in the month end.

However, the overall import volume could be lower than previous months, considering lukewarm spot discussions. Several Chinese buyers were heard reduced term cargoes to use more domestic materials this year. According to China Customs, in December 2017, China imported 186.8kt of benzene, down 26.2kt or 12.3% month on month. And according to Korea Customs Service, in January 1-21 of 2018, South Korea exported 158.9kt of benzene. Export to US was 56.8kt, to China 57.2kt and to Taiwan 39.2kt. In January-December of 2017, China's benzene imports from South Korea accounted for about 57% of total import.

Demand from China domestic market is expected to improve after Lunar New Year holidays. The discount of Jan/Feb discussions was around 50-100yuan/mt, and of Feb/Mar materials was around 50yuan/mt. Many downstream units which were shut for maintenances, came online gradually since late January. Haiwan Chemical started its 500kt/year styrene monomer unit in Qingdao, Shandong province around mid-January. The company was expected to get products near end January. If the unit could run smoothly, more benzene would be needed.

Domestic prices are expected to keep firm on favorable supply-demand expectations. Eyes could rest on FOB Korea prices and changes in port inventory in East China.
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