Benzene Falls to Five-Month Low in Asia as Q4 Supply Builds

Benzene spot prices in Asia tumbled below the $700 per metric ton FOB Korea mark for the first time in nearly five months on Sept. 30, closing at levels last seen on May 9, when the OPIS midpoint touched $682.50/mt FOB Korea. The decline reflects deepening fragility in the region’s aromatics market, pressured by a mounting supply overhang and seasonally slower consumption patterns going into the fourth quarter, according to market sources.

Despite an earlier rally driven by pre-holiday restocking in China, sentiment has since soured amid expectations of a supply influx and sustained downstream weakness. Industry sources told OPIS that the outlook for benzene is increasingly bearish through the remainder of 2025, as structural imbalances and compressed production margins continue to dominate trading behavior.

European Benzene Moves East Despite Arbitrage Closure

One of the most consequential developments weighing on the Asian market was the surprising emergence of Europe-origin cargoes, even as the arbitrage window between Europe and Asia looked unworkable. Multiple market participants confirmed that two traders had arranged shipments totaling between 20,000 mt and 30,000 mt, scheduled to arrive in Asia between November and December. Talk in the market suggests that total volumes from Europe could reach as high as 40,000 mt.

This trade came as a shock to many, particularly because the economics on paper were unworkable. During the week ended Sept. 19, European benzene averaged $655/mt CIF ARA, about $64/mt cheaper than Asia’s average. Freight for a 10,000 mt parcel from Rotterdam to China was quoted between $95–97/mt by shipbrokers, erasing most, if not all, of the apparent arbitrage advantage.

Still, sellers in Europe appear to have moved forward either to shed surplus volumes or hedge against weaker domestic pricing in the coming months. This arbitrage flow, while limited, has had an outsized impact on sentiment, amplifying concerns of an oversupplied Asian market just as regional demand enters a seasonally softer phase.

“No one expected volumes to move at those economics — it made zero sense on paper,” said a Singapore-based trader. “But when European tanks are full and Q4 demand looks even weaker, you move the barrels wherever you can. Asia was the only outlet, even if margins were thin or negative. It’s more about positioning than profit at this point.”

Downstream Demand Struggles to Support Prices

Compounding the pressure is weak consumption from major benzene derivatives in China, where producers of styrene monomer, phenol, acetone and nylon intermediates are facing negative margins. Although maintenance-related outages had temporarily supported prices, downstream plant economics have failed to justify higher run rates.

The situation is particularly acute in the SM sector, where margins remain deep in the red. Operating rates for SM are estimated in the low 70% range. Phenol and acetone plants, too, are running cautiously, with rates rebounding only recently to the mid-70s%. Caprolactam units are faring slightly better at high-80% operating rates, while producers of adipic acid –another major benzene consumer — are operating in the low 60% range, according to data from Chemical Market Analytics by OPIS.

Even as Chinese end-users restocked in the last days of September ahead of the week-long Golden Week holiday which began Oct. 1, the uptick in demand was not enough to reverse market sentiment. The OPIS average weekly ex-tank benzene price in East China slipped 1.1% week on week to 5,876 yuan/mt, breaking a two-week upward trend.

“There was some pre-Golden Week buying, but it felt more like routine restocking than a real shift in demand,” said a China-based trader. “The fundamentals haven’t changed — margins are still negative, and buyers are cautious.”

One bright spot in an otherwise subdued market has been a drop in inventories in East China. Benzene stockpiles in shore tanks declined 15% week-on-week to 116,000 mt as of Sept. 26, according to CMA. This has helped slow the rate of decline in spot prices and offered a sliver of hope to sellers anticipating stronger demand once Chinese markets reopen on Oct. 8.

Margins Collapse as Benzene-Naphtha Spread Narrows

The economics for producing benzene from naphtha have become increasingly unfavorable. Since Aug. 22, benzene plants have been operating at a loss, with the spread between benzene and naphtha narrowing below the typical breakeven of $150/mt. By Sept. 26, the spread had collapsed to just $99/mt — the narrowest margin since December 2022.

This sharp contraction has put tremendous strain on aromatics producers across Asia, particularly those operating toluene disproportionation and transalkylation units. While most of these units are still running at stable rates, worsening economics may prompt rate cuts in the coming weeks.

Cracker-based benzene production remains constrained by low ethylene margins, limiting the amount of benzene recovered from steam crackers. As a result, supply from crackers has stayed subdued, though this has not been enough to offset the bearish impact from downstream weakness and spot imports.

Wave of Turnarounds Shields Market — For Now

What has helped avoid a more severe collapse in benzene prices has been a wave of planned and unplanned plant turnarounds across Asia, particularly in China. These shutdowns have taken a significant chunk of benzene production offline and, in some cases, delayed the full impact of oversupply.

In China alone, nearly 2.5 million mt/year of nameplate benzene capacity is either offline or scheduled for maintenance in Q4. These include:

• Dalian Fujia Dahua, which shut two benzene lines (with capacities of 180,000 mt/year and 110,000 mt/year) from Sept. 17 for a month;
• PetroChina Fushun Petrochemical, which took 275,000 mt/year offline mid-August for 50 days; and
• Sinopec Zhenhai, which began a 50-day maintenance on a 240,000 mt/year cracker on Sep. 24.

Additional shutdowns are expected at PetroChina Yunnan, Shanghai Secco, Sinopec Guangzhou, Sinopec Maoming, Shanghai Petrochemical, Zhongyuan Petrochemical and Sinochem Quanzhou, cumulatively removing over 1.5 million mt/year of nameplate capacity temporarily.

Outside China, significant capacity will also be offline. Eneos will shut three lines, totaling 210,000 mt/year plant in Kurashiki from October, while LG Chem, CPC Corp. and PTT Global Chemical are all slated to take substantial capacity offline through November.

These outages have so far kept the market from tipping into a full-blown glut, but the relief may prove short-lived. Most shutdowns are expected to end by early December, just as European cargoes arrive in Asia and demand remains weak.

“Turnarounds are giving the market some breathing room, but it’s a temporary fix,” said the Singapore-based trader. “Once these units come back online and the European cargoes land, we could be staring at a serious oversupply situation unless demand picks up and right now, that looks unlikely.”

Q4 Outlook: Structural Weakness Persists

Looking ahead, the fundamental picture for benzene remains bearish. Although maintenance-driven tightness could offer temporary support, the return of shuttered capacity, coupled with incoming European shipments and still-fragile demand, is likely to cap any price upside.

Moreover, structural factors – the lack of Asia to U.S. arbitrage, high operating costs and persistent downstream weakness — suggest that benzene will continue to struggle.

Most industry watchers agree that any meaningful recovery will require more than just inventory draws or maintenance. “This is no longer just about supply,” the Singapore-based trader added. “Margins are broken, and downstream is simply not pulling.”

Strategic Implications for Market Participants

For benzene producers, the strategy for Q4 will likely focus on damage control — balancing run rates with margin losses, using maintenance to manage supply, and watching closely for any recovery in downstream consumption. Integrated players with exposure to downstream units may fare better, especially if they can shift production across chains, according to a Southeast Asia-based producer.

End-users should see the current dip as an opportunity to secure supply at relatively attractive prices, but with caution. The potential for volatility post-holiday, especially with European cargoes landing and regional units restarting, adds complexity to procurement strategies.

“The outlook for the rest of the year remains bleak,” said a China-based trader. “Contract negotiations for 2026 are expected to be more challenging and contentious than in previous years.”

–Reporting by Hazel Kumari, hkumari@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com