Sinopec’s price hike exceeded expectations, reversing hydrogenated benzene prices from a decline to an increase.

Lead: On July 3, Sinopec raised its East China benzene ex-works price by 200 yuan/ton to 6,900 yuan/ton, a move that exceeded market expectations. The core reason behind this price increase is that some Sinopec benzene units were shut down and have not yet returned to operation, leading to tight supply for the company itself and forcing the ex-works price upward. Meanwhile, on the same day, commodity futures markets showed a relatively strong performance, providing a favorable macro backdrop. Spot benzene prices in East China rose rapidly, and the price differential between the north and south widened accordingly.

Buoyed by this, inquiries for benzene and hydrogenated benzene in the northern market increased significantly, and spot prices reversed their decline and rebounded. Previously, the market had been under persistent pressure due to the fading geopolitical premium from expectations of a US-Iran ceasefire and the decline in crude oil prices. Sinopec's price adjustment re-anchored market sentiment, becoming a key turning point for hydrogenated benzene prices to stop falling and rebound this week.

Currently, the domestic benzene market presents a differentiated pattern of "overall tightness with localized increases."

1. Reduced Benzene Supply, Hydrogenated Benzene Units Restart

Some Sinopec units are still shut down and have not yet restarted. Coupled with some petroleum-based benzene units operating at low loads, the overall domestic supply of benzene continues to decrease. Meanwhile, benzene inventories at Jiangsu ports have dropped to a low of 74,000 tons, showing significant destocking compared to earlier periods. The combination of tight supply and low inventories provides strong support at the bottom for benzene prices. As long as crude oil does not enter a clear downward trend, benzene prices are expected to be relatively resilient.

Unlike the contraction in benzene supply, the supply of hydrogenated benzene itself is increasing. As of early July, the operating rate of the domestic hydrogenated benzene industry had rebounded to around 62%. Previously shut units, such as those at Panjin Ruide and Inner Mongolia Qinghua, have resumed production. The increase in hydrogenated benzene output has, to some extent, supplemented market supply. This means that after hydrogenated benzene prices rise in tandem with benzene prices, the ample supply situation will limit the upside potential. Some downstream users will still maintain a just-in-time procurement pace.

Over this weekend (July 4-5), Shandong independent refineries, facing no inventory pressure, actively pushed up their benzene quotes, with mainstream prices rising to around 6,600-6,650 yuan/ton. The price hikes by these independent refineries further solidified the upward momentum for benzene, providing a clear directional guidance for hydrogenated benzene pricing next week.

2. Benzene Demand Exists for Essential Needs, but Most Downstream Segments Are Loss-Making

Table: Theoretical Weekly Profit Changes in the Benzene Value Chain (Unit: yuan/ton)

Source: chempricehub.com

Currently, the main downstream sectors for benzene are generally loss-making, and product sales are sluggish. Units for styrene, caprolactam, and adipic acid have a mix of startups and shutdowns; some companies have reduced loads or halted production due to losses. Domestic benzene demand and end-user sales are performing weakly. Downstream users are increasingly resistant to high-priced raw materials, purchasing primarily for just-in-time needs with little willingness to build inventories. Being July, this falls within the traditional off-season for benzene demand. Without a clear recovery in end-user demand, the momentum for sustained price increases in hydrogenated benzene remains insufficient.

3. Crude Oil Narrows Range, Direction Uncertain

Brent crude oil is fluctuating and hovering around $70/barrel or higher. Recently, the market has been influenced by multiple factors, including the easing of geopolitical tensions and expectations regarding Fed policies, resulting in an unclear direction for oil prices. Its guiding effect on benzene and hydrogenated benzene costs is relatively neutral. In the absence of a significant sharp rise or fall in crude oil, benzene and hydrogenated benzene prices will depend more on their own supply-demand fundamentals.

Summary: Looking ahead, hydrogenated benzene market prices could see a modest increase from relatively low levels in the short term. The core logic is as follows: Sinopec's shut units are unlikely to return shortly, sustaining the tight supply of benzene; port inventories are at a low of 74,000 tons, limiting spot benzene availability; Shandong independent refineries have no inventory pressure and a strong willingness to support prices; the north-south benzene price spread has widened, increasing inquiries in the northern market and warming up spot trading sentiment.

However, the operating load of previously idled hydrogenated benzene units is recovering, and the increased self-supply will cap price gains. Additionally, widespread downstream losses and sluggish domestic/end-user demand limit the acceptance of high prices. Furthermore, July-August is traditionally a demand off-season, offering no basis for volume growth. Key factors to watch: 1. Closely monitor the restart timeline of Sinopec's idled benzene units. If these units return, it would significantly ease the supply tightness, putting downward pressure on both benzene and hydrogenated benzene prices. 2. Watch for changes in downstream unit operations. If worsening losses lead more companies to reduce loads or shut down, the contraction on the demand side would be bearish for hydrogenated benzene prices. 3. On the crude oil front, if Brent crude breaks below the key $70/barrel level, market sentiment could turn bearish, undermining the cost support logic.