A Year of Prolong Tightness in Benzene
2022, was a year of prolonged tightness in the benzene market amid the startup of massive benzene derivative capacity in mainland China. Resulting in a pricing spike in Benzene reaching the highest since the beginning of 2013. However, the demand for Benzene appeared to have weakened amid the deteriorating economics, and some producers had reduced operating rates since July as the economics became unfavorable.
Benzene capacity losses across Asia are the main reason for a tighter market, which became particularly evident in the second quarter. Heavy scheduled maintenance, coupled with reduced rates at ethylene crackers, contributed to the tightening availability of benzene.
Benzene co-produced from Asian PX units increased this year due to improved economics. Still, ethylene cracker operating rates have declined remarkably due to tremendous economic pressure since the beginning of 2022. This has contributed to the tightening availability of Benzene. The Russia-Ukraine conflict and high natural gas prices contributed to an increase in benzene prices in West Europe and the United States over the Asian market for most of 2022. With the surge of regional Benzene, disruptions resulted in increased volatility for the international benzene market creating the tightening of the benzene market in mainland China to a great extent.
The demand growth of benzene derivatives has significantly outpaced benzene supply additions over recent years, resulting in a balanced, tight benzene market. In 2021 approximately 40% of the nearly four mil mt of new benzene derivative capacity required the procurement of Benzene from the merchant market. While in 2022, around two mil mt of new styrene capacity has started up so far.
In conclusion, uncertainty is increasing rapidly, especially in mainland China. The country’s economy has experienced strong headwinds due to the ongoing zero-COVID policy and the property market slowdown. These significant slowdowns in economic activities have led to a slower benzene derivative demand growth than usual for most of 2022.