Benzene Market Sees Historic Moves: Geopolitical Conflict Triggers Supply-Demand Gap, Prices Experience Roller Coaster
Since entering March 2026, the domestic benzene market has experienced unprecedented "frenzied" volatility. Driven by a confluence of factors—escalating geopolitical conflicts, fears of feedstock supply disruptions, and concentrated turnarounds both domestically and internationally—benzene prices have fluctuated dramatically. This has not only set records for the largest single-day gains and losses in history but has also fundamentally reversed the previous market supply-demand pattern, ushering in a historic new phase of high-level market positioning.
Historic Volatility: Record Single-Day Fluctuations
Looking back at early March, the benzene market's performance was nothing short of breathtaking. Data shows that on March 9, benzene surged by RMB 2,700/ton in a single day, only to plummet by RMB 3,000/ton the following day (March 10), setting consecutive historical records for the highest single-day price swings. Such extreme price volatility is exceptionally rare in the chemical market, fully exposing the current market's frayed nerves and profound uncertainty.
As of March 23, the mainstream closing price in the East China benzene market briefly surged to RMB 8,755/ton, a sharp increase of RMB 640/ton from the previous day. Although prices experienced a technical correction subsequently, with spot discussions in East China retreating to the RMB 8,320–8,550/ton range by March 24, the overall market remained at elevated levels. As of March 16, the main benzene futures contract (BZ2604) on the Dalian Commodity Exchange had accumulated a monthly gain of over 23%, while spot prices in East China climbed to RMB 8,415/ton. The significant spot premium over futures indicated tight market supply.
The Spark: Dramatic Changes at the Strait of Hormuz
The direct catalyst for this round of price action pointed to the sudden escalation of geopolitical tensions in the Middle East. Since late February, heightened conflicts in the region have restricted passage through the critical Strait of Hormuz. As the world's most important oil shipping chokepoint, the Strait of Hormuz handles approximately 20% of global seaborne crude oil trade. The disruption in passage directly triggered market panic over potential supply interruptions for crude oil and naphtha.
This sentiment formed a rigid transmission along the "crude oil – naphtha – benzene" industrial chain. Benzene is produced via two main routes: petroleum-based benzene and hydrobenzene (from coal). Petroleum-based benzene accounts for about 80% of domestic production and is heavily dependent on naphtha feedstock. Concerns over feedstock supply quickly manifested in the benzene production sector, alongside market expectations of subsequent reductions and disruptions in imported cargoes.
Supply-Side "Triple Whammy": Turnarounds, Reduced Imports, and Refiners Prioritizing Fuel
If geopolitical conflict was the spark, then the substantial contraction on the supply side formed the underlying logic driving this price surge. Industry analysts suggest current benzene supply faces a "triple whammy" of concentrated spring turnarounds, anticipated reductions in overseas imports, and refiners shifting focus from chemicals to fuel production.
First, the domestic market is in the middle of the concentrated spring turnaround season, leading to a tangible supply contraction. By mid-March, the operating rate for domestic petroleum-based benzene had fallen to 74.20% on a weekly basis, with weekly output dropping to 439,300 tons, a decrease of 14,000 tons week-on-week. Multiple large units underwent maintenance or reduced load, including Zhejiang Petrochemical's 3.8 million t/y reforming unit (impacting approximately 550,000 t/y benzene capacity), along with units at Shenghong Refining & Chemical, CNOOC Shell, and Gulei Petrochemical.
Second, the outlook for imports has significantly soured, tightening supply. China's import dependency for benzene is around 20% , with imports highly concentrated. In 2025, imports from South Korea alone accounted for 50.54% of total imports, reaching 2.8342 million tons. Major import sources like South Korea, Japan, and Thailand are heavily reliant on naphtha imported from the Middle East. The disruption at the Strait of Hormuz is expected to indirectly impact the output and export capacity of benzene from these countries. Market expectations are building that subsequent import arrivals will notably decrease.
Third, refiners are prioritizing gasoline production ("protecting fuel") over chemicals, further compressing aromatics output. The current season aligns with the peak gasoline blending period. Coupled with surging gasoline prices due to Middle East tensions, refiners prefer to allocate aromatics components for blending to capture higher profits. Gasoline reforming margins significantly exceed aromatics reforming margins, and toluene blending margins are far superior to disproportionation margins. This strategic choice systematically reduces benzene production. Several refineries in East, South, and Southwest China have already implemented 10%-30% load reductions on aromatics units due to feedstock concerns.
Demand Side: Strong External Pull vs. Divergent Domestic Trends
In contrast to the sharp supply-side contraction, demand has demonstrated significant resilience. Styrene, the largest downstream consumer of benzene, maintained an operating rate around 71.79%. Despite some maintenance plans, improved profitability supported stable demand. Operating rates for phenol and aniline remained high at 86.87% and 89.04%, respectively.
Notably, external demand has emerged as a crucial support factor. In the first two months of the year, China's exports of household appliances surged by 16.4% year-on-year, while automobile exports jumped by 57.9% year-on-year. This robust end-product export growth has been a key driver of profit expansion along the industrial chain. Following the disruption at the Strait of Hormuz, styrene exports from the Middle East have been hindered, prompting a restructuring of global styrene trade flows. Import demand for Chinese styrene from regions like India and Europe is expected to increase significantly, indirectly boosting demand for the feedstock benzene.
