Geopolitical tensions continue to support crude oil prices, while hydrogenated benzene is expected to remain at elevated levels in the short term.

Introduction: This weekend, geopolitical tensions drove a sharp rise in crude oil prices during off-hours trading, boosting market sentiment. The downward trend in the domestic pure benzene market was temporarily halted. Pure benzene prices from Shandong local refineries stabilized at 10,300 RMB/ton. Weekly orders for hydrogenated benzene were fully booked early, with factories proceeding with order deliveries as scheduled. Downstream consumers with rigid demand struggled to find advantageous supply sources, raising their procurement prices by 100–150 RMB to reach 10,350–10,400 RMB/ton.

What are the factors influencing the price of domestic hydrogenated benzene this weekend?

I. Geopolitical Situation Continues to Support International Crude Oil Prices, Benefiting Domestic Hydrogenated Benzene

1. Iranian armed forces fired upon and intercepted "non-compliant" vessels transiting the Strait of Hormuz.
2. Pakistan struck armed border outposts and military camps in Afghanistan.
3. Ukraine's energy infrastructure suffered large-scale attacks.

Affected by geopolitical tensions, crude oil prices surged sharply in off-hours trading. The upward trend in oil prices during early and mid-October was primarily supported by expectations of tightening supply. Looking ahead, there are no clear signs of easing in the US-Iran standoff. Transit volumes through the Strait of Hormuz remain unstable, and Houthi attacks on Saudi energy facilities continue. Expectations of tight supply are likely to persist, suggesting that international oil prices in October may exhibit characteristics of "overall high-level operation with only minor declines possible." High costs provide bottom support for domestic pure benzene prices.

II. Tight Liquidity in Domestic Pure Benzene Spot Market; Low Port Inventory Levels

Due to concerns about future raw material shortages, some refineries engaged in defensive load reductions, meaning the logic of tight pure benzene supply continues to dominate pricing. Additionally, as some short positions from September shifted into October, combined with insufficient inventory at East China ports and limited overall arrivals in October, East China pure benzene port inventories are expected to decline next week to approximately 38,000 tons.

Regarding hydrogenated benzene, crude benzene supply is relatively loose in certain regions. Furthermore, shutdowns of some units have reduced traders' procurement volumes, lowering market activity and suppressing the upside potential for crude benzene prices. The spread between crude benzene and hydrogenated benzene has widened, resulting in healthy margins for hydrogenated benzene producers. On October 15, the profit margin for hydrogenated benzene enterprises in the Shandong region stood at 410 RMB/ton.

Currently, hydrogenated benzene profits are at a relatively high level, prompting the return of some previously shut-down units, such as Hebei Rongte, Henan Yutian Unit 1, and Henan Jinyuan Phase II. Consequently, the domestic operating rate for hydrogenated benzene increased, reaching 59.84% on October 15. However, as winter approaches, maintenance plans exist for some hydrogenated benzene units, so any further increase in the operating rate is expected to be limited, and a decline is anticipated.

III. Overall Decline in Downstream Operating Rates, But Profit Margins Recovered

Table: Weekly Theoretical Changes in Pure Benzene Industry Chain Profits (Unit: RMB/ton)

Data Source: Chempricehub Information

Capacity utilization rates among key downstream products declined to varying degrees, though profit margins for some products recovered.

• Styrene: Dagu and Shell each took one styrene production line offline for planned maintenance. Meanwhile, styrene unit operating loads in Shandong, East China, and South China experienced minor fluctuations.
• Phenol/Acetone: Huizhou Zhongxin's Phase II phenol/acetone unit restarted after a brief shutdown. Yangzhou Shiyou and Guangxi Huayi halted operations due to unforeseen issues.
• Caprolactam: Luxi Chemical reduced its load to 90%. Baling Hengyi and Yongrong also lowered their operating loads.
• Aniline: Shandong Jinling's 200,000-ton unit is under maintenance from Sept 28 to Oct 20. Shanxi Tianji is under maintenance from Oct 12 to Oct 27. Jilin Xuyang Kangnaier Unit 1 is under maintenance from Oct 13 to Oct 26. Dongying Caijin is undergoing rotating maintenance and catalyst replacement from Oct 2 to Oct 16.
• Adipic Acid: Some units at Huafeng and Shenma are shut down. Haoyuan is operating at approximately 70% capacity. Taihua is operating at approximately 50% capacity.

Overall Analysis: Currently, ongoing Middle East tensions and high tanker freight costs may support international oil prices remaining at elevated levels. From a fundamental perspective, domestic pure benzene is not without support, and downside room is relatively limited. The current tight supply landscape for pure benzene remains unchanged, with East China inventories at historic lows, weekly pure benzene production declining, and only limited increases in hydrogenated benzene output. There are currently no sudden negative factors on the supply side, but declining operating rates among key downstream sectors mean they are maintaining only rigid-demand procurement, leading to insufficient market absorption. Without significant cooperation from rising oil prices, substantial upside potential for pure benzene and hydrogenated benzene is expected to be limited in the near term.