Lead-in: Recently, the continuous decline in crude oil prices, coupled with open interest reductions in pure benzene and styrene futures, has exerted significant downward pressure on the domestic pure benzene market. As a complementary product to pure benzene, hydrogenated benzene prices have followed suit. As of the latest data, pure benzene prices from Shandong local refineries have fallen to around 7,400 yuan/ton, and near-term hydrogenated benzene prices are expected to face similar downward pressure.

1. Co-movement of Crude Oil Decline and Open Interest Reduction

International crude oil prices have recently slipped continuously due to a lack of bullish catalysts. As a naphtha cracking product, pure benzene's pricing center is highly correlated with crude oil. The decline in crude directly reduces the theoretical cost of pure benzene. With commodity futures generally falling, pure benzene and styrene futures have experienced both declining prices and reduced open interest, reflecting weakening market sentiment. Futures prices, as leading indicators for spot markets, directly influence spot pricing, pulling down pure benzene at Shandong local refineries to the 7,400 yuan/ton threshold. Hydrogenated benzene is produced from crude benzene, and its pricing references the pure benzene market. Against the backdrop of falling pure benzene spot prices, hydrogenated benzene plants have passively lowered their offer prices to maintain shipments, with the magnitude of the drop largely tracking that of pure benzene.

2. Minor Improvement in Supply-Demand Fundamentals: Reduced Supply, Slightly Increased Demand

Despite the price decline, the fundamentals are not entirely deteriorating. In fact, supply-demand margins are showing some improvement. On the supply side, some domestic cracking units have reduced pure benzene output due to profitability issues or routine maintenance. For hydrogenated benzene, continued low prices have pushed some plants into losses or thin margins, lowering the industry's operating rate. As of June 11, the comprehensive operating rate for hydrogenated benzene has declined to 63.97%, and market-available supply has not increased significantly.

On the demand side, existing demand persists, but incremental demand is limited. The combined operating rates of downstream plants for styrene, aniline, and caprolactam have edged higher, translating into a slight month-on-month increase in consumption of pure benzene/hydrogenated benzene. However, given the price differential between hydrogenated benzene and petroleum-derived benzene, downstream buyers—while ensuring stable feedstock supply—continue to purchase hydrogenated benzene at a certain proportion to reduce costs.

Judging from the supply-demand balance sheet, the contraction in pure benzene and hydrogenated benzene supply slightly outpaces the increase in demand, indicating marginal improvement in fundamentals. Under normal logic, this should support price stabilization, but prices continue to drift lower, suggesting the primary issue lies elsewhere, not in supply.

3. Continued Decline in Pure Benzene Port Inventory in East China

As of June 8, pure benzene inventory at East China ports had fallen to 100,000 tons. Typically, low inventories provide price support, but in this downturn, that logic has failed. The inventory decline is more attributable to reduced earlier imports and some downstream withdrawals for essential needs, not to active restocking by downstream buyers. The market has not developed a sentiment of hoarding in anticipation of stronger prices. Amid ongoing price declines, traders and downstream buyers generally follow the "buy on rising, not on falling" mindset. Even with lower inventory levels, they view it as part of planned withdrawals rather than a sign of improving demand trends, hence are reluctant to step in and buy the dip.

We are now entering summer, the traditional off-season for chemical products. Weakness in end-use demand is unlikely to reverse in the short term. Unless crude oil stages a strong rebound, the pure benzene and styrene futures markets are expected to remain under pressure. Hydrogenated benzene will continue to track pure benzene weakly, with further modest downside potential. Medium-term attention should be on the following variables: when downstream margins recover will be key to whether pure benzene/hydrogenated benzene can stop falling. If hydrogenated benzene prices fall below plant breakeven levels and losses persist, could more widespread shutdowns be triggered? And if crude oil stabilizes and rebounds, or if macro policies provide a boost to end-user demand, market sentiment could shift quickly.