Chemicals, Aromatics, Solvents & Intermediates
December 16, 2024
Global benzene markets to navigate uncertainties in H1
HIGHLIGHTS
Asian demand could improve
Europe dependent on US to absorb excess supplies
Construction sector could be pillar of support
The global benzene market is anticipated to face uncertainty from broader macroeconomic factors in 2025; nevertheless, industry participants believe the construction sector in both the US and Europe could provide crucial support in the upcoming year.
"Uncertainty overhangs the benzene market for 2025, with companies closing or reviewing the future of assets which are producing benzene feedstock or consuming benzene," said Katherine Elliot, an analyst at S&P Global Commodity Insights. "We anticipate changes in trade flows both within the region and with the global market."
Asian benzene remains weak
After an impressive rally in the latter half of 2024 that drove Asian benzene prices to a two-year high, market sources were less optimistic in their outlook for early 2025.
Despite China holding its position as the world's largest benzene importer, sources noted new capacity additions coupled with a slowdown in downstream demand suggests the country's import volumes may be nearing its peak. In addition, ongoing losses and looming uncertainty in downstream operations could further cloud demand forecasts.
With the Asia arbitrage opportunity to the US likely closed in the first quarter of 2025, market participants said traders are likely to show limited interest in sending cargoes to the US Gulf Coast. Instead, there is a growing trend of moving cargoes from Europe to the US. Some market sources predict that this shift may partly replace the Asia-US flows, although there is hope that these flows could eventually resume as US imports remain cautious through Q4 2024.
On the supply front, weak gasoline markets at the end of 2024 could prompt integrated petrochemical producers to prioritize benzene production over gasoline. Moreover, supply from TDP units in the region could increase as margins improve due to a downturn in toluene markets.
US benzene oversupply to persist
While the spot benzene market was in a backwardation structure for much of 2024, many market participants believe that the contango, which began in August, is likely to continue into the new year. The M1-M2 contango widened to 8 cents/gal on Dec. 9, out from a 3 cents/gal contango Oct. 31, according to Platts assessments.
Benzene inventories also climbed to record highs toward the end of the year, with sources noting that tanks were full in Houston and along the Lower Mississippi River. Domestic supply was expected to remain long as favorable TDP margins are driving production and keeping operating rates high, which are projected to remain strong in early 2025.
In the US, market participants are also optimistic about a rebound in new home construction in 2025, spurred by demand for building materials on the back of lower interest and mortgage rates. In the same vein, sources said the health of the automotive industry, which heavily relies on SBR rubbers and ABS plastics, will also be crucial, as these materials are essential for vehicle interiors and tire production.
Headwinds in European benzene
The European benzene market is grappling with challenges due to economic factors and Chinese imports.
"Our base case is for the wider European region to be roughly balanced, but an increasing shortage in the Mediterranean may drive increased trade flows within the region," Elliot said, adding the intermittent trans-Atlantic flow of benzene will continue to resolve regional imbalances, particularly during the winter when derivative demand is typically lowest.
Industry participants are increasingly reliant on the US to absorb benzene and stabilize the market. Operating rates in Western Europe remain low, with little expectations for improvement, raising concerns for benzene and its derivatives, which are closely tied to the struggling construction and automotive sectors.
The downstream landscape, particularly for styrenic chains and polymers, is challenging. Adding to the bearishness, a significant influx of Chinese products continues to pressure the European value chain. While many stakeholders are worried about stagnation in the construction industry, some believe that a slight recovery may be on the horizon for 2025.
The automotive sector is also facing headwinds, hindered by economic conditions and low consumer confidence. In contrast, the packaging industry is thriving, bolstered by steady demand driven by food consumption, providing essential support to the market.
Chemical Trends H1 2025
This feature is part of our bi-annual report analyzing the biggest themes and trends that will dominate chemicals markets in the year ahead. Explore more features below, or to read articles looking at the year ahead for a wider range of chemical markets, visit Platts Connect
Explore all stories
US-China trade relations to ripple through global fiber market in H1
Construction activity may boost PVC, EPS demand in H1
Inclusion commitments raise global demand expectations for recycled polymers
Low-carbon methanol markets gear up for FuelEU Maritime regulation
Capacity shifts, soft downstream demand to shape ethylene market in H1
Bearish sentiment clouds chemicals outlook for automotive demand
Latin American petrochemical importers expect lower US volumes