Mideast Tensions Reignite Rally in Asia’s Benzene, SM Markets
Asian benzene and styrene monomer markets rallied sharply during Wednesday morning trading as renewed conflict in the Middle East reignited concerns over regional supply, sending crude oil prices higher and prompting buyers to return to the spot market, according to market sources.
The U.S. launched a new round of strikes targeting more than 80 sites in Iran and revoked a waiver allowing new sales of Iranian oil after Tehran carried out further attacks on commercial vessels transiting the Strait of Hormuz. The escalation further undermined a fragile peace agreement and fuelled a sharp rise in crude oil prices, supporting aromatics values.
Spot benzene buying interest strengthened as Chinese importers sought August-arrival cargoes amid tightening regional availability. Sellers had largely committed their August-loading cargoes during the second half of June and early July, leaving limited prompt supply in the market, according to traders.
Chinese import demand has recovered following several months of subdued arrivals. Imports fell from 458,743 mt in March to 440,645 mt in April before dropping to a multi-year low of 234,792 mt in May. Market participants expect import volumes to recover moderately in June, although inventories in East and South China remain low following the prolonged shortage of imported cargoes.
Chinese buyers were actively seeking August cargoes from South Korea, with a total of 19 CFR China spot transactions heard concluded. Premiums climbed from the mid-$20s/mt to the low-$30s/mt above the weekly FOB Korea average, according to market sources, reflecting tighter prompt availability.
Spot sentiment strengthened further during the morning session. Benzene bids for August loading opened at $860/mt FOB Korea before rising to $880/mt by midday, around $12/mt above transactions concluded the previous day.
The bullish sentiment was mirrored in China’s futures market. August benzene contracts on the Dalian Commodity Exchange settled 5.5% higher at 6,951 yuan/mt by the midday close, while domestic spot discussions rose 3.5% to 7,260 yuan/mt ex-tank, equivalent to $927 CFR China on an import parity basis — the highest level in two weeks, according to OPIS data.
The gains extended downstream into the SM market despite expectations that additional supply from the Middle East and Northeast Asia would become available in the coming weeks.
August SM futures on the Dalian Commodity Exchange climbed 4.4% to 7,765 yuan/mt by midday, marking the strongest day-on-day increase since March 27, according to OPIS data. Domestic Chinese SM discussions rose even more sharply, jumping nearly 6% to 7,930-7,950 yuan/mt ex-tank, their highest level since June 16.
Market participants said vessels carrying SM had recently transited the Strait of Hormuz and successfully delivered cargoes to buyers in India, reducing immediate Indian demand for Chinese exports. However, traders cautioned that a prolonged escalation could once again disrupt Middle Eastern exports.
“If tensions persist, shipowners may become increasingly reluctant to load cargoes from the Middle East,” a China-based trader said. “Indian buyers would likely return to the Chinese spot market if regional supply becomes less reliable.”
The U.S. decision to revoke waivers for new Iranian oil sales is also expected to affect Iran’s spot SM exports, adding another layer of uncertainty to regional supply and reinforcing the bullish sentiment across Asia’s benzene and SM markets.
—Reporting by Hazel Kumari, hkumari@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com