Demand uncertainty to influence key benzene markets in H2 2024

The global benzene market will likely see demand uncertainty in the second half of 2024 as market participants struggle to find any clear cues. Amid the ongoing downstream capacity expansions, China stands out as a key market for benzene demand, whereas styrene capacities in the US remain resilient given their feedstock advantage.

Asian benzene supplies remain short

In Asia, prices are projected to remain bolstered in H2 2024 due to a lack of new capacities while derivative capacities are expected to continue expanding. A poor macroeconomic outlook, however, will likely weigh on China's domestic consumption of benzene derivatives. Moreover, as new Chinese downstream capacities pressure margins for producers globally, trade barriers in the form of anti-dumping duties will curtail export demand for Chinese benzene derivatives, limiting demand in the biggest consumer country in the world, the US.

South Korea recently announced its decision to initiate anti-dumping investigations into Chinese-origin styrene monomer, while further downstream, Turkey has decided to do the same for polystyrene imports from major Asian producing countries.

Amid the ongoing shipping delays through the Panama Canal, shipping time from Northeast Asia to the US Gulf Coast remains extended up to two months. As a result, traders are moving less cargoes from Northeast Asia to the US. Along with higher-than-expected gasoline stocks in the US, demand for gasoline blendstocks such as cumene and ethylbenzene was lackluster compared to the past years.

"Recent indications of improving polymer demand remain inconsistent so it is likely that light naphtha demand will remain soft as crackers will maintain low rates, which will continue to divert aromatics feedstock to the gasoline pool and limit the production of benzene, especially during the summer driving season," said S&P Global Commodity Insights Analyst Kate Lee.

Mixed signals from US derivative markets

The future of USG benzene pricing coming into H2 lacks clarity, with downstream styrene markets and gasoline demand expected to have a significant impact on the direction of benzene prices.

With various styrene plants due to resume operations in late May, it could support benzene prices, given the increased demand for fresh tons. This could, however, create a vicious cycle as styrene prices could face a downward correction with greater styrene availability within the market, thus reducing affordability to buy spot benzene.

Separately, increased demand for ethylbenzene, a derivative of benzene, in the gasoline blending pool would bolster benzene prices. However, high inflation rates and uncertainty surrounding the US presidential elections in November could result in slower demand.

Commodity Insights Analyst Michel Molinier said, "In spite of relatively high 2024 benzene prices (Panama Canal drought, reformer outages during the first quarter...) compared to the same period in 2023, ethylbenzene and styrene in the US continue to benefit from competitive ethylene cost of production, which favors ethylbenzene use for gasoline blending and styrene production on the USGC vs. other regions."

European outlook to remain stable

In Europe, benzene outlook in H2 is anticipated to remain stable as supply condition and derivatives demand are set to remain unchanged, sources said.

Ongoing shipping disruptions on the back of the Red Sea crisis led to higher freight rates globally and extended transit time. Therefore, traders adopted a prudent approach despite arbitrage opportunities for benzene imports into Europe. Nonetheless, the decrease in import volume provided relief to domestic producers for a healthier supply-demand balance amid sufficient domestic supply.

Further downstream, polystyrene and acrylonitrile-butadiene-styrene sectors in Europe observed similar support due to reduced imports caused by shipping disruptions, but the market is wary if demand for domestic materials is sustainable amid continued pressure from competitively priced Asian imports.

A slight demand uptick would be expected from the ethylbenzene market if the economics for gasoline blending turn favorable, while demand from the phenolic chain is expected to remain subdued, sources added.

"Recent announcements by SABIC and ExxonMobil of the planned permanent closure capacity of steam cracker capacity during 2024 in Geleen, Netherlands and Gravenchon, France respectively will lead to a reduction in pygas available for benzene extraction. Both crackers consume(d) some liquid feedstocks, whereas SABIC's planned restart of its Wilton, UK cracker will provide minimal pygas for benzene extractors as the site will only consume ethane feedstock. Downstream styrene margins are expected to weaken as planned maintenance in both Europe and regions exporting to Europe reduces. Economic rate reductions may be required again in Europe during the second half of the year, especially in the fourth quarter," said Commodity Insights Analyst Katherine Elliot.

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Chemical Trends H2 2024
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

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