Asia’s Benzene Faces Deep Losses as Margins Hit Three-Year Lows

Benzene producers across Asia are enduring the worst stretch of margins in years as a cocktail of oversupply, weak downstream demand and limited arbitrage outlets drives spreads below breakeven levels, forcing producers to confront a market that one participant describes as “relentlessly punishing.”

Since late August, margins for benzene makers have slipped below the $150 per metric ton breakeven benzene-to-naphtha spread required by most regional plants, according to multiple market players. Instead of recovering, the spread collapsed. Beginning Aug. 22, as benzene prices plummeted, the benzene-naphtha spread fell to $142/mt and kept sliding, hitting a three-year low of $63.25/mt on Nov. 7, OPIS data shows.

“It’s been horrendous,” said a South Korea-based producer. “Not only are we below breakeven, we’ve been operating far below it for weeks with no relief in sight.”

Arbitrage Shut, Derivatives Weak

The pain deepened as arbitrage flows to the U.S. failed to open during September and October, while derivative markets across Asia spiraled into negative margins of their own. Producers of styrene monomer or SM, phenol/ acetone, caprolactam or CPL, and adipic acid cut run rates, slashing benzene demand and sending Asian spot values plunging.

The midpoint of the FOB Korea benzene assessment embarked on a straight seven-week decline, tumbling from $720/mt on Sep. 17 to $644/mt by Nov. 6, the lowest in four years, according to OPIS data.

“You had this perfect storm of awful margins everywhere post Golden Week,” said a Singapore-based trader. “SM was negative, phenol producers were negative, even CPL margins were squeezed. Everyone was pulling back.”

In China, CMA data for the week ended Nov. 14 showed SM operating rates in the mid-60%, phenol/ acetone near 70%, CPL in the mid-80%, and adipic acid at mid-60% — all levels consistent with reduced benzene consumption.

Heavy Chinese Turnarounds Slash Consumption

A packed Chinese SM turnaround slate amplified the demand collapse. SM production typically consumes about 80% benzene and 20% ethylene per mt of output, making SM outages especially damaging for benzene balances.

Sinochem Quanzhou’s 450,000 mt/year SM unit, originally set for maintenance in late November, was forced to shut in the middle of this month after a fire in its No. 1 light hydrocarbon recovery unit. The outage, expected to last until mid-January, has removed its three benzene lines, totaling 645,000 mt/year, from the market.

Sinopec Zhenhai Refining & Chemical or ZRCC has kept its 620,000 mt/year SM unit offline since Sept. 24, with a restart planned for late December. The shutdown has resulted in the loss of 41,000 mt/month of benzene consumption.

Satellite Chemical’s 600,000 mt/year SM plant entered a 45-day maintenance on Oct. 15. The non-integrated facility normally requires around 40,000 mt/month of spot benzene to run at full rates. At the same time, the company — China’s largest importer of U.S. ethane — paused plans to build a 1.5 million mt/year ethylene cracker due to prolonged U.S.- China trade tensions and a lack of necessary approvals. The project, with an estimated cost of $1 billion, would have supported downstream SM production.

Shandong Chambroad (Jingbo) Petrochemicals shut its entire complex, including a 670,000 mt/year SM plant and 50,000 mt/year benzene unit on Oct. 13, with operations not expected to restart until year-end. At full rates, the complex consumes around 45,000 mt/month of benzene, including a 40,800 mt/month shortfall sourced from the spot market.

Also in mid-October, Sinopec Guangzhou began a two-month maintenance at its 80,000 mt/year SM unit and 75,000 mt/year benzene unit.

These outages combined to crush sentiment in the domestic Chinese market after the Golden Week holiday. The midpoint of the ex-tank benzene assessment fell almost 10%, from 5,868 yuan/mt on Sept. 30 to 5,305 yuan/mt by Nov. 6, a level last seen in February 2021.

Gasoline Blending Opens a Lifeline

Yet even as petrochemical demand cratered, a surprising lifeline has emerged from fuels. A surge in octane booster demand for gasoline blending components in early November — coupled with refinery outages that tightened gasoline supply — sent premiums over RBOB gasoline futures sharply higher.

The shift encouraged refiners to push aromatic molecules like toluene and xylene into the gasoline pool rather than extract them for petrochemical use. The resulting increase in blending demand opened the long-shut Asia-to-U.S. arbitrage for aromatic blendstocks and spurred new trade flows from Europe to the U.S., including ethylbenzene or EB cargoes, market sources said.

“Gasoline demand suddenly picked up,” added the Singapore-based trader. “Blenders wanted everything from BTX to EB, and the U.S. market was pulling hard.”

Benzene spot prices responded quickly. The OPIS midpoint for prompt loading rebounded from $644/mt FOB Korea on Nov. 6 to $664/mt by Nov. 17, a 3% gain.

Shipping sources reported fresh enquiries for 4,000 mt–40,000 mt BTX cargoes loading from South Korea and Taiwan, China for November to early December, heading to the U.S. Gulf — signaling the clearest arbitrage window in months.

China Restarts Offer Hope

Expectations that benzene consumption will recover in late November and December were also buoyed by a wave of SM restarts.

PetroChina Guangdong Petrochemical resumed operations at its 800,000 mt/year SM plant on Nov. 4 after technical issues that started on Oct. 28. The plant requires around 53,500 mt/month of benzene at full rates, while its three upstream lines can produce 67,500 mt/month of benzene.

Tianjin Bohua Chemical restarted a 450,000 mt/year SM unit in early November after a four-day outage on Oct. 28. The facility produces no benzene and draws roughly 30,000 mt/month from the market when running at full capacity.

Also in early November, Anhui Jiaxi New Material Technology restarted its 350,000 mt/year SM plant after completing a 35-day turnaround. As a non-integrated producer, it normally consumes around 23,500 mt/month of benzene.

Hengli Petrochemical, meanwhile, canceled a planned Nov. 10 shutdown at its 720,000 mt/year SM unit, opting to keep rates steady.

The cumulative effect of these restarts, combined with improving arbitrage and the gasoline blending pull, helped reverse the SM-to-benzene spread. After reopening from the Golden Week lull, the spread surged from $106.50/mt on Oct. 9 to $147/mt by Nov. 19, a 38% increase, according to OPIS data.

“The market finally feels like it’s finding a floor,” said a China-based trader. “There was nothing but bad news for two months, and now we are starting to see green shoots — restarts, arbitrage, blending. It’s not a rally yet, but it’s stabilizing.”

–Reporting by Hazel Kumari, hkumari@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com