Introduction: Currently, the domestic hydrogenated benzene market is undergoing structural changes, characterized by overall industry losses that are widening, declining operating rates, and falling prices. This marks a shift from the high-profit, high-operating-rate, and high-price environment seen since the onset of the Middle East situation. Below are the core recent dynamics of the hydrogenated benzene market and a brief outlook.

1. Worsening Losses and Reduced Supply of Hydrogenated Benzene

Recently, the theoretical profit of hydrogenated benzene plants in the Shandong region has dropped to -63 yuan/ton, putting the industry into a state of widespread losses. The direct cause is the dual squeeze from weakening hydrogenated benzene prices and relatively firm feedstock crude benzene prices. Amid the downtrend, some hydrogenated benzene producers have opted for maintenance shutdowns.

Latest data show that as of June 4, the domestic hydrogenated benzene operating rate has fallen to 63.76%, down 7.99% from the year's high of 71.75%. Weekly output has correspondingly declined to 84,600 tons. This reduction in supply has, so far, failed to provide effective price support, primarily because hydrogenated benzene accounts for a small volume, only 20% of total domestic supply.

2. Continued Decline in East China Port Inventories

As a related product to hydrogenated benzene, petroleum benzene has a large supply volume, accounting for 80% of total domestic supply. The market continues to closely monitor port inventories. After sustained destocking at East China ports, about 90,000 tons of arrivals are expected this week. Based on the current pace of arrivals and pickups, inventories are projected to fall back to a relatively low level of 50,000–60,000 tons in the later period.

In terms of weekly petroleum benzene output, it has declined recently. After a phased rebound expected in the coming period, output is forecast to decline again from late June to mid-July.

3. Speculation Fades, Demand on a Marginal Improvement

With signs of easing in the Middle East situation and expectations of lower crude oil prices, the earlier speculative stockpiling behavior driven by geopolitical risks has notably cooled. Additionally, since China launched the nationwide census-based invoicing economy in April this year, trading volumes in both spot and paper markets for benzene have shrunk significantly. The census invoicing has to some extent standardized tax and transaction procedures, but it has also raised transaction costs and reduced operational convenience. Enthusiasm among some small and medium-sized traders has waned, and hedging and speculative demand in the paper market has cooled, leading to reduced market liquidity. Currently, almost all benzene market transactions have reverted to essential procurement, with market sentiment turning rational or even cautious.

Weak terminal demand has dragged down prices of major downstream benzene derivatives (such as caprolactam, phenol, aniline, etc.), compressing profit margins across the downstream sector. This directly limits downstream purchasing willingness and acceptable price levels for benzene.

However, some downstream units that were previously shut down, such as aniline, phenol, and caprolactam plants, are gradually coming back online, leading to a slow increase in weekly benzene demand. This is a potential positive signal, suggesting that the worst phase of demand may be passing, though transmission to prices still requires time.

Summary

Overall, the current hydrogenated benzene market is in a transitional phase characterized by "profit losses, production cuts, and marginal demand improvement." Given expectations of weaker crude oil, benzene prices will remain under pressure in the near term. Hydrogenated benzene has weak bargaining power, and industry losses are expected to widen further. Only when supply is significantly reduced, or downstream essential demand recovers along with continued destocking at East China ports, can industry profits be repaired. Key factors to watch going forward include: j) developments in the Middle East and further crude oil trends; k) changes in downstream prices and plant operating conditions.