OUTLOOK ’18: China benzene import demand may exceed 3m tonnes

SINGAPORE (ICIS)–China’s benzene imports in 2018 could exceed 3m tonnes, which represent a more moderate growth compared with the projected increase of over 50% in 2017, market players said.

The country is a key import market for benzene in Asia.

China’s benzene imports for 2017 are projected to hit 2.5m tonnes compared with around 1.6m tonnes in 2016, largely due to start-ups of several new downstream plants.

Growth in downstream capacity is expected to continue in 2018, although at a slower pace.

Contract settlements for 2018 so far seemed to point largely to a roll-over with discounts/premium showing only small changes to 2017’s level. Buyers’ desire to secure significantly larger discounts appeared to have been met with limited success.

The anti-dumping (ADD) investigations on key downstream styrene monomer (SM) sector continued to be closely watched by benzene players.

With China’s overall demand of nearly 10m tonnes of SM per year and importing more than 3m tonnes annually, any ADD levied on key suppliers of SM to China might affect the current trade flow of SM in the region, which in turn might impact the balance of benzene across the region.

South Korea remained the largest supplier of SM to China, with more than 1m tonnes shipped each year.

However, increasing demand for benzene in China will be little affected as the country is slated to add SM capacities through to 2021.

Meanwhile, the Asian benzene market closed 2017 on an upbeat note, with spot prices hovering at around the mid-to-high $800/tonne FOB (free on board) Korea levels at year end, up from the low-$700/tonne FOB Korea levels in the middle of the year.

However, a significant part of the run-up in the fourth quarter could be attributed to strong performance in the US market post-Hurricane Harvey due to supply issues. Since Asian countries such as South Korea and Japan ship regular quantities to the US gulf, higher prices in the US market lifted Asian numbers.

The opening of the east-west arbitrage in the fourth quarter helped to alleviate the supply overhang in the region.

Inventories along eastern China rose to around 150,000 tonnes in the second half of September and hovered around this level in the fourth quarter.

Some market participants previously expected the stock level in eastern China to climb since buying impetus for import cargoes were soft. However, the emergence of the opportunity to ship to the US has helped to cap the growth in shore tank inventories in China.

However, with run rates at refineries over in the US getting back to normality, elevated prices in the US Gulf could ease in the weeks ahead in early 2018. Delays of shipments from Europe also caused prices to increase in the fourth quarter.

This is not to suggest that demand for benzene in China was weak, which it was not. Decent performance in the downstream sectors like styrene, phenol, adipic acid, caprolactam etc. kept consumption of benzene strong. However, users of benzene often chose to purchase locally as domestic cargoes were priced cheaper than imports.

Outlook article by Clive Ong