Asia Benzene Rebounds to $1,000/mt as Iran Conflict Compounds Supply Tightness
Asia’s benzene prices returned to $1,000 per metric ton FOB Korea on July 22 after volatile energy markets, renewed military exchanges between the U.S. and Iran, and extensive regional plant turnarounds tightened the outlook for prompt supply.
The rebound followed a brief correction on Tuesday, when the midpoint of the OPIS FOB Korea benzene assessment slipped to $982/mt as crude oil and other energy values declined. Diplomatic efforts to de-escalate hostilities between Washington and Tehran and negotiate another ceasefire had temporarily eased concerns over supply disruptions through the Strait of Hormuz.
Sentiment reversed a day later after U.S. President Donald Trump played down the prospect of immediate negotiations with Iran, while the two countries continued exchanging military strikes. Threats by Houthi militants in Yemen against shipping in the Red Sea added another layer of uncertainty to regional energy and petrochemical trade flows.
The July 22 rebound to $1,000/mt FOB Korea came after benzene had reached a six-week high on July 20 at $1,001/mt FOB Korea, supported by the earlier rally in crude oil and concerns that renewed fighting could further disrupt petroleum and petrochemical feedstock movements through the Strait of Hormuz.
The rapid changes over the three days highlight the degree to which benzene has become tied to developments in the Middle East. The market is reacting not only to changes in crude oil and naphtha values, but also to the risk that shipping disruptions could restrict feedstock availability or interrupt contracted petrochemical deliveries, according to industry sources.
Benzene has remained particularly sensitive to such risks because regional supply is already being reduced by scheduled and extended plant maintenance across China, Japan and Southeast Asia.
China’s Production Losses Peak in July
China’s estimated benzene production losses are expected to reach their highest monthly level of the year in July as multiple reformers, crackers and aromatics units remain offline.
Production losses were estimated at 334,000 mt in May and 376,000 mt in June before rising to 431,000 mt in July, according to Chemical Market Analytics by OPIS calculations. Losses are forecast to fall sharply to 136,000 mt in August as several facilities are expected to return from maintenance.
Hongrun Petrochemical began a 55-day planned turnaround on July 6, while Shenghong Petrochemical commenced a 50-day shutdown in early July. Longjiang Chemical took its plant offline for 25 days on June 30, and Dongying Weilian began a 45-day turnaround on June 25.
Lihuayi is scheduled to shut for about one month at the end of July, extending the period of constrained domestic availability into August.
Several longer-running outages have also removed benzene supply from the Chinese market.
Sinopec Hainan began maintenance in early June and is not expected to restart until late September. Sinopec Yangzi shut its entire complex on May 12, with no definitive restart timeline announced.
Zhejiang Petrochemical shut one reformer on March 5 and took another reformer and a paraxylene unit offline in late March. Restart dates for the affected units remain unconfirmed.
Fujian Gulei began planned maintenance on March 9, with its restart now delayed until late July. Shijiazhuang Refinery has remained offline since March 15, while its restart timing is still unclear.
Ningbo Zhongjin began maintenance on May 29 and is expected to resume operations around mid-August. Fujian Fuhaichuang also shut for one month from June 20.
The concentration of outages in July has tightened domestic availability at a time when Chinese commercial inventories have already declined significantly. Although some production is expected to return in August, prolonged or delayed restarts could prevent supply from recovering as rapidly as current projections suggest.
Japan, Southeast Asia Outages Tighten Regional Balance
Maintenance outside China has further reduced the availability of export cargoes in Asia.
Japan’s benzene production losses were estimated at 34,000 mt in May, increasing to 51,000 mt in June and 53,000 mt in July, according to CMA calculations. Losses are expected to ease to approximately 17,000 mt in August, although recent outages have already limited Japan’s contribution to regional supply during the peak of the maintenance season.
Eneos shut one production line from March through June, while Kashima Aromatics is scheduled to keep its aromatics plant offline from May through August. Mitsubishi Chemical Corp. took one line down from May through July, while Mitsui Chemicals has a line under maintenance between July and August. Osaka Petrochemical’s benzene plant was shut from June through the first half of July.
Southeast Asian supply has also been affected. Malaysia’s Petronas Chemicals Aromatics took its aromatics units offline from May through July, resulting in an estimated benzene production loss of about 50,000 mt. Thailand’s PTT Global Chemical is expected to have three production lines offline from July through the first half of August, removing an estimated 58,000 mt of benzene production, according to CMA calculations.
Supply from other production routes remains constrained as well. The majority of toluene disproportionation, transalkylation and paraxylene units in Asia are operating at reduced rates.
Benzene output from steam crackers has also been limited by unfavorable production economics. LPG has become more competitive against naphtha, encouraging crackers to increase LPG consumption. This reduces the production of pygas and other aromatics-rich streams, resulting in lower benzene output.
The combination of planned maintenance, reduced aromatics unit operating rates and greater LPG cracking has left the regional supply balance tighter than plant capacity figures alone would indicate.
U.S. Arbitrage Competes With Chinese Demand
The widening price difference between the U.S. and Asia has encouraged traders to evaluate additional benzene exports from South Korea to the U.S.
U.S. benzene prices increased less sharply than Asian values during the latest rally but remained about $308/mt above Asia when comparing August prices in both regions. Based on September U.S. pricing, the premium over Asian benzene was approximately $281/mt, during the week ended July 17.
The price difference remains sufficient to support the arbitrage after accounting for tariffs and freight costs, prompting traders to explore additional export opportunities.
South Korea exported 59,750 mt of benzene to the U.S. in May, followed by 26,144 mt in June and 6,002 mt during the first half of July.
A 6,000-12,000 mt benzene cargo was heard seeking a vessel for H1 August loading, according to a shipping source.
Further exports to the U.S. could reduce the volume available to China just as Chinese importers are returning to the spot market. The competition between U.S. and Chinese buyers is therefore expected to become an increasingly important factor in determining Asian premiums and prompt availability.
High-Priced Inventories Curbed Earlier Chinese Buying
Chinese benzene imports declined sharply in May after the earlier Middle East-driven price rally left several downstream consumers holding high-cost inventories.
Imports reached 458,743 mt in March and 440,645 mt in April before falling to 234,792 mt in May, according to Global Trade Tracker data. Volumes subsequently recovered to 316,636 mt in June.
The reduction in May imports followed a sharp increase in regional benzene values during March and April.
The midpoint of the OPIS FOB Korea assessment surged from $766/mt on Feb. 27 to a four-year high of $1,208/mt on April 4 as the conflict between Iran and the U.S. disrupted energy and petrochemical markets.
A series of force majeure declarations linked to the closure of the Strait of Hormuz had unsettled Chinese importers. Concerns that suppliers would be unable to fulfil contractual commitments encouraged buyers to secure March- and April-arrival cargoes aggressively.
The buying spree exposed end users to high benzene costs when energy and derivative markets subsequently weakened.
The FOB Korea midpoint declined to $1,139/mt by April 30 and continued falling through May and June. It dropped from $1,122/mt on May 4 to $818/mt by July 1, a decline of about 27%.
Values for benzene derivatives also fell alongside weaker energy markets, compressing downstream margins and reducing buyers’ willingness to purchase spot benzene.
Many consumers stayed out of the import market while attempting to consume inventories bought during the March-April rally. This inventory digestion contributed to the sharp reduction in May import volumes.
Inventory Drawdown Brings Chinese Buyers Back
The prolonged period of limited spot import purchases eventually tightened China’s domestic balance.
Firm domestic consumption and reduced import arrivals caused commercial benzene inventories in East China to fall below 100,000 mt in early July.
Domestic prices subsequently rose sharply. The midpoint of the OPIS China ex-tank benzene assessment increased by more than 25%, climbing from 6,815 yuan/mt ex-tank ($870/mt on an import parity basis) on July 1 to 8,550 yuan/mt ex-tank on July 20, its highest since May 5.
As Chinese domestic values strengthened, the spread between ex-tank cargoes and FOB Korea benzene began widening from mid-June, making imported cargoes more economically attractive.
Chinese import premiums rose from the high-$10s/mt above the weekly FOB Korea average in June to the mid-$40s/mt by mid-July. Buying interest for August-arrival cargoes became firm, with most sellers heard to have sold out their available supply.
Import discussions have since shifted toward September deliveries. September cargoes were discussed at premiums in the low-$40s/mt to the weekly FOB Korea average.
The sustainability of this buying will depend partly on domestic inventory levels and the relative movement of Chinese ex-tank and FOB Korea prices. A narrowing of import margins or another sharp fall in derivative values could once again curb Chinese demand.
Weak Derivative Margins Limit Benzene Upside
The recovery in benzene import demand has not been accompanied by a significant improvement in downstream operating conditions.
Benzene consumption in China remained broadly flat, pressured by negative production margins and extensive maintenance across the main derivative sectors.
During the week ended July 17, China’s styrene monomer operating rate remained in the mid-60% range, according to CMA data. Phenol-acetone operating rates declined into the same range. Caprolactam operating rates recovered slightly into the low-60% range, while the adipic acid operating rate fell to the low-60% range.
The maintenance season has been particularly heavy between May and August for SM, benzene’s largest derivative market, with numerous plants in China, Japan and Taiwan undergoing turnarounds.
Several Northeast Asian phenol plants have also scheduled maintenance during the May-August period. These shutdowns have limited the demand response to tighter benzene availability. Even where plants remain operational, negative margins may encourage producers to reduce output or bring forward maintenance if benzene costs continue rising without a corresponding increase in derivative prices.
Middle East Developments to Set Near-Term Direction
Middle East developments are expected to remain the primary driver of benzene prices in the immediate term.
The decline on July 21 and rebound on July 22 demonstrated how quickly market direction can change in response to ceasefire expectations, military strikes and threats to regional shipping.
Renewed disruption in the Strait of Hormuz or Red Sea could lift crude oil, naphtha and benzene prices while raising concerns over physical feedstock availability and production margins. Conversely, credible diplomatic progress toward a lasting ceasefire could remove part of the geopolitical premium.
Beyond energy markets, participants will focus on whether mainland China’s renewed import demand can be sustained and whether favorable arbitrage economics generate additional exports to the U.S.
The regional benzene market remains relatively balanced despite the concentration of production losses. Tight supply, low Chinese inventories and competing U.S. demand are supporting prices, but weak economics across the derivative chain remain a significant constraint.
Continued negative margins, low derivative operating rates and the possibility of further production cuts could limit the extent of any additional benzene rally, particularly if geopolitical tensions begin to ease.
—Reporting by Hazel Kumari, hkumari@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com