Asia’s Benzene Holds Steady on Balanced Fundamentals, but Q4 Outlook Still Murky

Asia’s benzene market is showing signs of stability for September as scheduled maintenance offsets tepid demand, keeping supply-demand fundamentals largely balanced. However, amid macroeconomic uncertainties, global trade headwinds and fresh capacity, market participants remain cautious heading into the final quarter of the year.

The midpoint of FOB Korea benzene prices rose 4.3% through July, from $$713 per metric ton to $744/mt on Aug. 1, driven by tighter spot availability and firm Chinese demand amid a wave of regional plant shutdowns, according to OPIS data. Traders said the increase reflected near-term fundamentals and sentiment rather than any strong bullish momentum.

“The market’s holding up for now,” said a South Korea-based trader. “We’re not oversupplied, but we’re not tight either. Prices have been trading in a narrow range, and sentiment could shift quickly.”

September Supply Balanced by Turnarounds

A wave of scheduled benzene plant turnarounds across Asia is tightening spot availability for September, even as downstream demand remains modest. In Japan, Osaka Petrochemical will shut its 130,000 mt/year unit in August. South Korea’s Hanwha TotalEnergies plans to take two units, with annual capacities of 270,000 mt and 222,000 mt, offline from August through September. Elsewhere, Mailiao’s Formosa Chemicals & Fibre Corp. will idle a combined 490,000 mt/year of capacity next month.

Over in mainland China, several benzene plant turnarounds are scheduled for the late part of the third quarter. These include PetroChina Fushun’s 275,000 mt/year unit, Sinopec Guangzhou’s 75,000 mt/year unit, Sinopec Zhenhai Refining & Chemical Co.’s 240,000 mt/year unit and Sinopec Zhongyuan’s 46,000 mt/year plant.

“Spot supply for August and September is limited because several Southeast Asian producers are only covering term commitments,” added the South Korea-based trader. “That’s helped prevent a buildup of surplus cargoes in Northeast Asia.”

At the same time, expectations of lower run rates at reformers and toluene disproportionation or TDP units due to weak economics have further curbed benzene production.

Chinese Demand Supportive but Cautious

China’s benzene imports fell 14% month on month to 354,555 mt in June. However, market participants expect July volumes to remain steady and anticipate a rise in August.

Import demand showed signs of recovery starting late July, helping to support FOB Korea prices. Buyers, who had previously withheld spot purchases on expectations of softer prices, returned to the market as spot supply for August loading tightened.

“There was a shift in buying behavior in the last week of July,” said a Singapore-based trader. “Buyers realized the usual sellers from Southeast Asia weren’t offering spot cargoes.”

Domestic demand for styrene monomer or SM, a key derivative of benzene, showed a modest recovery in late July, helping to support Chinese benzene import interest. SM spot prices rose in parallel with benzene, although margins for standalone SM producers remained below breakeven.

According to OPIS data, the SM–benzene spread averaged $184–187/mt in the first half of July, narrowed to $151/mt by the week ending July 25, and then rebounded to $166/mt by Aug. 1. During the same period, the midpoint of the SM CFR China assessment increased 2.8%, rising from $895/mt on July 1 to $920/mt by Aug. 1.

“Improved local sentiment helped lift both SM and benzene,” said a China-based trader. “But it’s still fragile. As nobody’s ramping up output, buyers are in bargain-hunting mode.”

Q4 Outlook Clouded by Mixed Signals

While fundamentals appear balanced in the near term, the outlook for Q4 remains murky. A number of benzene units are set to return from maintenance between late August and October, potentially increasing regional supply.

China’s Shandong Yulong Petrochemical began test runs at its newly built reformer in late July, marking the start of benzene production from the unit, which has a nameplate capacity of 249,000 mt/year. The facility is part of the company’s larger integrated complex, with its second steam cracker — expected to contribute further benzene output — scheduled to come online in October.

Additional restarts across the region are expected to bring more supply into the market. In northeast China, Dalian-based Fujia Dahua is set to resume operations at its 180,000 mt/year benzene unit following maintenance. Fujian Fuhaichuang Petroleum & Chemical will also restart its 233,000 mt/year unit this month, while Sinopec Tianjin is preparing to bring back two benzene units, with a combined capacity of 100,000 mt/year, online in early September.

Outside China, Japan’s Mitsui Chemicals is restarting its 145,000 mt/year benzene plant in August after a maintenance shutdown which began in May. In South Korea, SK Geo Centric also plans to restart its 125,000 mt/year unit this month following a turnaround which started in June.

These restarts are expected to offset some of the regional supply losses from ongoing maintenance, potentially loosening the current supply-demand balance heading into Q4.

“The risk is Q4 turns long again as these units come back,” said the South Korea-based trader. “If demand doesn’t improve, we’ll have to watch margins very closely.”

However, not all participants are bearish. Some expect ongoing downstream maintenance, weak run rates and continued poor TDP margins to temper the return of benzene volumes.

“The restarts won’t flood the market overnight,” said the Singapore-based trader. “It really depends on how aggressively these plants run, and that’s still uncertain.”

Geopolitics and Trade Policy Add to Caution

Meanwhile, the re-emergence of U.S. trade tensions has added another layer of complexity. The Trump administration’s move to impose a 15% tariff on most Japanese goods effective Aug. 7 has reignited concerns among Japan’s chemical exporters, though petrochemicals have been largely spared for now.

South Korea, a major benzene exporter to the U.S., saw its tariff rate reduced from the originally proposed 25% to 15%. However, despite the recent uptick in U.S. benzene spot prices, the trade arbitrage remained firmly closed. Market participants said the combination of elevated freight costs and the still-substantial tariff has rendered South Korea’s cargoes economically unviable for U.S. importers.

“It’s not directly hitting benzene, but it reinforces a more protectionist trade environment,” said a Japan-based trader. “Everyone remains wary, especially with the closure of the Asia-to-U.S. arbitrage.”

“We’re focused more on how demand plays out in Q4, but we can’t ignore the policy backdrop,” the trader added.

Margins May Improve on Naphtha Weakness

One potential tailwind for benzene producers is the declining naphtha market. With weaker demand from steam crackers and high inventories, naphtha prices are expected to stay soft, offering some relief for benzene margins.

“If naphtha falls further, integrated margins could start to turn around,” a Korean producer said. “That’s one reason some are holding out for better economics in September.”

Nonetheless, traders say few producers are willing to run aggressively unless derivative margins improve. TDP units, in particular, are expected to remain idled due to persistently negative netbacks.

Heading into September, Asia’s benzene market sits in a state of fragile equilibrium. Supply disruptions from scheduled turnarounds are offsetting waning demand, keeping prices steady. But with significant capacity returning in Q4 and external uncertainties mounting, traders are watching for any signs of imbalance.

“It’s a tightrope,” said one Singapore-based broker. “Right now, the numbers work, but all it takes is one weak derivative or one big plant upset to flip the picture.”

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