Asia’s Benzene Margins Struggle to Recover On Surging Naphtha Costs
Asia’s benzene market is showing tentative signs of margin recovery, but producers remain under sustained pressure as feedstock disruptions linked to the Middle East conflict continue to distort cost structures and trade flows across the region, according to industry sources.
The benzene-to-naphtha spread — a key indicator of producer profitability — climbed to a four-week high of $124 per metric ton on April 9, according to OPIS data, after briefly returning to positive territory on April 6. The rebound follows a prolonged period of negative margins since March 19, yet remains below the estimated breakeven range of $150–200/mt required for most regional producers.
“The recovery in spreads looks encouraging on paper, but we’re still not at a level where aromatics producers are comfortable,” a South Korea-based trader said. “At $120–130/mt, margins are still compressed and will remain so as naphtha costs surge on limited supply.”
The fragile improvement comes amid extreme volatility in benzene pricing since the onset of the Middle East conflict, which has disrupted feedstock flows and forced widespread operational adjustments across Asia’s petrochemical sector. Tight naphtha availability, exacerbated by risks to shipping through the Strait of Hormuz, has emerged as the central constraint shaping market dynamics.
Spot benzene values have surged sharply in response. The midpoint of the OPIS FOB Korea assessment for prompt loading climbed from $766/mt FOB Korea on Feb. 27 to a four-year high of $1,208/mt FOB Korea on April 7, reflecting both supply-side disruptions and a wave of restocking demand.
However, the rally has been uneven, with sharp corrections emerging in tandem with shifts in macro sentiment. Prices retreated after news of a conditional two-week ceasefire between Iran and the U.S. eased concerns over shipping disruptions, allowing traffic to partially resume through the Strait of Hormuz.
“The benzene market is trading headline risk almost as much as fundamentals right now,” a Singapore-based trader said. “Every development in the Middle East is feeding directly into the price direction.”
Feedstock Shock Ripples Through Northeast Asia
The strain on benzene margins is closely tied to the unprecedented surge in naphtha costs, which have risen sharply amid supply uncertainties. Japan and South Korea, two of Asia’s largest benzene exporters, have been particularly exposed due to their heavy reliance on Middle Eastern feedstock.
Japan imports roughly 60% of its naphtha requirements, with more than 70% sourced from the Middle East, according to the Japan Petrochemical Industry Association. Since the conflict began, naphtha prices have risen over 60%, sharply inflating production costs for downstream petrochemical producers.
Japanese firms have responded by curbing output. Idemitsu Kosan has reduced ethylene production at its Chiba and Tokuyama plants, joining Mitsubishi Chemical Group Corp., Mitsui Chemicals and Cosmo Energy Holdings in implementing similar measures. Within weeks of the conflict, six of Japan’s 12 ethylene plants had already lowered operating rates, according to industry sources.
“Feedstock availability is the key issue right now, not demand,” a Japan-based trader said. “Even if plants want to run harder, there is no incentive as naphtha is in short supply and expensive.”
While the association has said that there is no immediate risk to supply due to existing inventories, concerns remain acute. Efforts to secure alternative supplies outside the Persian Gulf are underway, but these are unlikely to fully offset the shortfall in the near term. Analysts have also noted that any release of reserves may prioritize gasoline production over petrochemicals, further tightening feedstock availability for aromatics units.
South Korea faces a similar challenge. The country imports over 70% of its naphtha from the Middle East, accounting for nearly half of its total consumption, according to industry sources. In response to tightening supply, the government has introduced emergency measures to restrict naphtha exports and stabilize domestic availability.
Under new regulations implemented in late March, exports are effectively prohibited unless granted special approval, while refiners and petrochemical companies are required to report production, imports and inventory levels on a daily basis. Authorities have also been granted powers to intervene in supply allocation to prevent bottlenecks.
Despite these interventions, the structural imbalance persists. According to Global Trade Tracker data, South Korea’s naphtha imports totaled 26.4 million mt in 2025, compared with exports of 3.9 million mt, highlighting the country’s dependence on external supply.
China Market Tightness Supports Benzene Demand
In China, tightening domestic fundamentals have provided some support to benzene prices despite broader volatility. Commercial inventories in East China have declined steadily for five consecutive weeks, falling from 309,000 mt in early March to 278,000 mt by April 10, according to Chemical Market Analytics by OPIS data. The drawdown reflects a combination of reduced import arrivals and steady downstream consumption, which has kept prompt supply tight.
“Inventory levels are trending lower, and that’s giving some support to the spot market,” a China-based trader said. “Even with the price swings, buyers still need to secure cargoes.”
Domestic pricing has mirrored this volatility. The midpoint of the OPIS China ex-tank assessment surged 63% within a span of just over a week, jumping from 6,090 yuan/mt ex-tank on Feb. 27 to 9,950 yuan/mt ex-tank by March 9, the highest level since mid-2022. Prices have since retreated to 8,420 yuan/mt ex-tank as of April 10, tracking declines in energy markets following the ceasefire announcement.
“The backwardation reflects how tight the immediate market is,” the China-based trader added. “But it also shows that buyers expect some normalization once feedstock flows stabilize.” Backwardation generally indicates a perception of tighter prompt supply.
On an import parity basis, domestic Chinese prices have remained competitive relative to international benchmarks, encouraging continued buying interest from importers even amid elevated price levels.
Downstream Stability Limits Demand Destruction
Despite the turbulence in feedstock markets, downstream benzene derivative sectors have remained relatively resilient. Operating rates across key segments have held steady, preventing a sharp contraction in demand.
Styrene production rates in China have stabilized in the low 70% range, while phenol/acetone units are operating in the mid-80% range. Caprolactam plants are running in the high-70% range, and adipic acid operating rates have edged up to the low-70% range during the week ended April 10, according to CMA data.
This steady consumption has helped absorb some of the supply disruptions, preventing an even sharper spike in benzene prices.
However, structural constraints on the supply side continue to dominate the market outlook. Several crackers and reformate units across China are operating at reduced rates or undergoing maintenance, further tightening benzene availability.
Facilities at CSPC, ExxonMobil Huizhou, PetroChina Guangdong and BASF Zhanjiang have maintained lower operating rates, while a series of planned shutdowns is expected to further curb output.
Cnooc Taizhou is scheduled for a two-month maintenance program in April, while PetroChina Jilin plans to shut a cracker for one month in mid-April. Other outages include extended maintenance at Cnooc Ningbo Daxie, Zhejiang Petrochemical, Fujian Gulei, Sinopec Shijiazhuang Refining & Chemical Co. and Qingdao Lidong.
“These outages are compounding the feedstock issue,” according to a China-based broker. “Even if naphtha supply improves, it will take time for operating rates to normalize.”
Outlook: Margins at the Mercy of Geopolitics
Looking ahead, the trajectory of benzene margins will remain closely tied to developments in the Middle East and their impact on naphtha flows.
While the recent ceasefire has provided temporary relief, market participants remain cautious about its durability and the extent to which shipping through the Strait of Hormuz can fully resume.
“There’s still a lot of uncertainty around logistics and insurance for vessels,” a Singapore-based trader said. “Until that’s resolved, feedstock supply will remain a key risk.”
In the near term, the benzene-to-naphtha spread is expected to remain below breakeven levels, particularly if naphtha prices stay elevated relative to benzene.
At the same time, ongoing supply disruptions and inventory drawdowns are likely to keep the benzene market structurally tight, supporting prices despite the pressure on margins.
“It’s a classic squeeze,” the Singapore-based trader added. “Producers are facing high costs and tight supply at the same time. Until one of those eases, the market will stay volatile.”
—Reporting by Hazel Kumari, hkumari@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com