By Song Shuhui, Transportation & Sales Center of Tianjin PC

China’s benzene supply composition

It is estimated that the demand for benzene in China will be around 15.2 million tons in 2018, while the outputs of petroleum benzene and hydrogenated benzene, which is mainly produced in North China, Shandong and East China are expected to be 9.5 million tons and 3.3 million tons respectively. Hence, there is still a gap of 2.4 million tons, which needs to be satisfied by imports. The market ratios of hydrogenated benzene and petroleum benzene in recent years are shown in Table 1.

   Table 1 Benzene supple composition in China, 2013-2018

   The apparent consumption of petroleum benzene declined slightly in 2014 and has been gradually increasing since then. In 2017, the apparent consumption of petroleum benzene hiked to over 11 million tons. In terms of hydrogenated benzene, its apparent consumption has increased in the past five years, but the actual growth is only 200 kt, far less than the growth rate of petroleum benzene, and its market share has been declining year by year.
   It is estimated that the total domestic benzene production capacity will increase to 13.2 million t/a in 2018 (not including Hengli PC and Zhejiang PC’s two lines which are under construction now). If these two plants are put into operation by the end of December, the total domestic benzene capacity will reach 15.37 million t/a. In addition to the expansion of Sinopec, Shandong teapot refineries have also begun to expand. Overall, Sinopec, PetroChina and CNOOC still dominate more than 75% of China’s total benzene capacity.

   In terms of import and export, China is a net importer of benzene from 2015 to 2017, and the import dependency of these three years are respectively 12.44%, 15.66% and 22.46%. In 2018, the import and export volumes went slightly down over the same period of last year. From January to September, the total import amount was 1.73 million tons and the export was 29.5 kt.
   As the domestic supply cannot meet the downstream demand, the import volume continued to keep at highs. Due to environmental protection awareness, the production of hydrogenated benzene is limited, resulting in supply shortness and high prices. On the basis of increase in demand, the supply gap will continue to rise, and the import volume is expected to increase steadily.
   On the export side, the volume is small. On the one hand, domestic supply continues to be tight and there is no urgency to export. On the other hand, domestic products do not have advantages in terms of cost and quality. So the export volume will not increase significantly in 2019.

Styrene is the biggest consumer

   The apparent consumption of benzene through 2015 to 2018 is shown in Table 2. Styrene is still the largest consumer, accounting for 41% of total consumption. Caprolactam and phenol account for 16% and 12%, respectively, followed closely by other derivatives such as MDI, aniline, adipic acid, etc.

   Table 2   Apparent consumption of benzene, 2015-2018  (kt)

   In 2018, the newly added growth engines of benzene are mainly concentrated in products such as styrene and caprolactam. In the future, the importance of styrene and caprolactam will continue to increase, and the ratio of phenol and aniline will be relatively reduced.
   From 2015 to 2018, the strong demand from styrene and caprolactam results in the rapid growth in benzene product and import, and the growth rate has accelerated.
   In 2018, the benzene capacity expansion rate lags far behind that of the downstream capacities. The newly added demand has to be met by imports and hydrogenated benzene. China’s benzene self-sufficiency rate dropped to 77.16% in 2017, the lowest level since 2007. Given the slow expansion pace of both benzene and its derivatives, the whole year’s apparent consumption in 2018 is expected to be 11.88 million tons.

The profit of benzene industry chain is declining

   From 2017 to 2018, the overall profit of benzene industry showed a downward trend, while the profits of its downstream products were generally on the rise. In 2017, the average annual profit of benzene was about RMB2 000/t, and the lowest level was at above RMB1 100/t. However, in 2018, the port inventories in East China were almost at high levels, significantly dampening the price of benzene and causing its profit to fall. The average annual profit of benzene in 2018 was only at RMB957/t. The profits of downstream products have improved significantly compared to 2017, especially styrene and caprolactam, whose average annual profits in 2018 exceeded RMB1 700/t and RMB3 800/t respectively.
   From 2017 to 2018, the inventories at ports of East China increased significantly, from less than 30 kt at the beginning of 2017 to over 220 kt in June 2018. After being affected by the maintenance of large-scale benzene plants (Sichuan Petrochemical, Yangzi Petrochemical, Zhenhai Refinery), the inventories once reduced, but still remained at more than 150 kt. Therefore, the long-term high inventory in 2018 has affected the price and profit of benzene to some extent.

Benzene expansion in the future

   It is estimated that the next three years will see additional 7.1 million t/a benzene capacities, while the downstream expansion will be 14.4 million t/a, consuming 11.3 million tons of benzene theoretically. The supply-demand gap, namely the import volume will continue to increase. With the launching of the new large-scale chemical industry bases, the growth rate of teapot producers will outpace that of Sinopec and PetroChina. The plan for the expansion of benzene in the next three years is shown in Table 3.

   Table 3    Benzene expansion in next three years

   Most of the downstream expansions are from styrene, and the capacity growth is limited in sectors of phenol, caprolactam and adipic acid. Styrene will remain the most important derivative of benzene.