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China's benzene demand weakens on COVID-19 outbreak
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China's benzene demand weakens on COVID-19 outbreak

Views:0     Author:Site Editor     Publish Time: 2020-03-31      Origin:Site

The COVID-19 outbreak has seen petrochemical units across China reduce output due to logistical restrictions. Refined oil prices dropped sharply on weaker demand. Some refineries cut processing rate or closed processing units due to the epidemic, resulting in less benzene output. Coal-based benzene output decreased apparently in Feb due to the logistical constraints, with the output loss estimated at about 130-140kt. By end February, operating rate of benzene units in China was around 74.3%, and of coal-based benzene 48%. The figures had recovered slightly from mid-Feb with the gradual recovery in logistics.

Due to the run rate cuts of benzene downstream units, benzene demand form downstream derivatives was estimated at about 1 million tons, down 300kt from the average level in 2019.

In end February, oil prices and international benzene prices dropped sharply due to the COVID-19 outbreak outside China. Some market participants concerned about benzene supply from South Korea and Japan.

In 2019, China imported around 1.94 million tons of benzene. Among that, imports from South Korea and Japan accounted for around 64% of total benzene import. Capacity of the two totaled around 14 million tons.

However, the impact of the epidemic on the industry was mainly seen in benzene downstream derivatives due to the previous logistical constraints. Benzene transport mainly depends on shipping, so the direct impact on benzene was limited. Meanwhile, the outbreak in South Korea was concentrated in Daegu, which is far from the petrochemical base. By now, few run cuts of benzene units were heard.

South Korea, the biggest benzene exporter in Asia, exported around 2.5-2.7 million tons of benzene per year since 2015, with the monthly average export around 210-220kt. Major destinations are Chinese mainland, Taiwan Prov. of China, The United States, Japan and the Middle East.

Given weak demand and tight benzene tank space in East China main ports, China is not the first choice for South Korean benzene. Korea-US benzene arbitrage window remained open on the workable spread between the two regions.

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