SunSirs: Benzene Prices Set to Dip Before Rebounding Amid Soft Terminal Demand

Looking at the recent maintenance and resumption plans of the industry, the comprehensive operating rate of the downstream of benzene will further decrease, and the terminal demand is weak. From the perspective of the maintenance of benzene equipment, the equipment maintenance scale in November and December is expected to decline from 213,600 tons in October to about 110,000 tons, and the operating rate of benzene is expected to decrease first and then increase.

In mid-June, benzene futures began a seasonal decline driven by downstream demand.

The downstream of benzene usually builds up inventory in advance. From July to the middle of September, the downstream production rate is on the rise. From the end of September, the production rate begins to decline, and demand weakens. Data show that the demand for the downstream of benzene increased by 8% year-on-year from January to September. In terms of products, the demand for styrene, caprolactam, and phenol increased by 17.3%, 7.6%, and 2% year-on-year, respectively, while the demand for sebacic acid and benzene amine decreased by 3.8% and 8.2% year-on-year, respectively.

For styrene, the production profit was still acceptable from May to July, and the monthly production capacity utilization rate of production enterprises remained at a high level of 77%-79% from June to August. However, the high production capacity utilization rate led to an increase in supply, and the production profit of styrene continued to decline after August, once falling to the historical low level of the same period, and the inventory pressure also continued to increase. From the perspective of profit, there is room for the production capacity utilization rate to decline in the fourth quarter.

In terms of caprolactam, the operating rate has rebounded to a higher level since July, but the production profit continues to decline, and it is more likely that the operating rate will continue to decline in the future. From the latest data, the operating rates of benzene's main downstream products, styrene, caprolactam, and adipic acid, all decreased month-on-month this week.

Looking at the recent maintenance and resumption plans of the industry, the comprehensive operating rate of the downstream of benzene will further decrease, and the terminal demand is weak. From the perspective of the maintenance of benzene equipment, the equipment maintenance scale in November and December is expected to decline from 213,600 tons in October to about 110,000 tons, and the operating rate of benzene is expected to decrease first and then increase.

China is the world's largest consumer and importer of benzene. From the data over the years, China's dependence on imported benzene is about 20%, and logistics costs have a significant impact on the domestic price of benzene. Data show that the domestic production of benzene increased by 5.7% year-on-year from January to September, the import volume increased by 40.5% year-on-year, and the total supply increased by 10.4%. The main reason for the significant increase in China's benzene imports from January to September is that South Korea's benzene has been almost entirely transported to China since the fourth quarter of last year. Data show that China imported a total of 4.115 million tons of benzene from South Korea in the first three quarters of this year, a significant increase year-on-year. However, according to recent data, the shipment volume of South Korea's benzene from October 1st to 20th was 115,000 tons, a decrease of nearly 50% year-on-year, and it is expected that the domestic benzene import volume in the fourth quarter will also decrease.

In terms of cost, the pattern of supply exceeding demand in the crude oil market is expected to continue in the medium to long term, combined with the recent decline in geopolitical risks, the probability of a downward trend in crude oil prices is relatively high, which may weaken the cost support for benzene.

To sum up, the probability of short-term crude oil prices falling is relatively high, and the demand for benzene at the terminal is weak. The factors such as the high operating rate of the downstream in the medium and long term and the decrease in imports are all conducive to the price of benzene. It is expected that the main contract of the futures 2603 will fall first and then rise.

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