Core Viewpoint - Since the beginning of the year, the price of pure benzene futures has been continuously rising, with a cumulative increase of 7.38% since January 5 [1] Supply Side - The supply of pure benzene has remained stable recently, with the operating rate around 77%-78%, which may increase in the future. In February, several maintenance operations are expected to conclude, leading to an overall increase in supply [2] - New production capacities have been added, including BASF's 180,000-ton cracking capacity in Zhanjiang and Hunan Petrochemical's 60,000-ton reforming capacity in January. However, overall supply is expected to decrease in the second quarter due to maintenance plans at several refineries [2] - By 2025, there is a significant oversupply of pure benzene anticipated, primarily due to high import volumes. South Korea plans to retire 2.7-3.7 million tons of naphtha cracking capacity, which could lead to a reduction of over 500,000 tons in pure benzene capacity [2] Downstream Demand - Downstream demand shows a clear divergence. For styrene, the restart of several facilities is expected to increase overall production, supported by high processing margins [3] - In contrast, the demand for caprolactam may rise in the short term but is expected to decline later due to profit guidance. The current operating rate for PA6 is only 70%, indicating a significant drop [3] - The phenol market is seeing increased demand due to the restart of Zhejiang Petrochemical's phenol unit, although overall profit margins remain low [4] Inventory and Pricing - As of January 19, the port inventory of pure benzene was 297,000 tons, a decrease of 27,000 tons from the previous period. High inventory levels are primarily due to increased imports, with December imports reaching approximately 530,000 tons [4] - To alleviate high inventory pressure, pure benzene may need to offer discounts to downstream users, which could maintain the BZ-SM price spread at a strong level in the second quarter [4][7] Market Sensitivity - The styrene market is currently sensitive to news, with price fluctuations driven by various external factors. High styrene prices may lead to negative feedback, potentially impacting pure benzene prices [5][6] - The combination of high imports and weak downstream demand is likely to result in continued inventory accumulation, creating a supply-demand scenario where both supply and demand may increase in the short term [7]

Core Viewpoint - The recent increase in pure benzene prices is driven by three main factors: the anticipated end of maintenance for styrene units, geopolitical tensions in the Middle East affecting crude oil prices, and price adjustments by Sinopec to support benzene prices [6][9][10]. Group 1: Reasons for Price Increase - The first reason for the rise in pure benzene prices is the expected end of maintenance for two styrene units, which, combined with a high BZ-SM price spread, has led to increased buying interest in pure benzene [7]. - The second factor is the geopolitical tensions in the Middle East, which have pushed up crude oil prices, thereby providing a geographical premium to pure benzene [9]. - The third reason is Sinopec's two price hikes within the week to support benzene prices [10]. Group 2: Current Market Conditions - The current fundamentals for pure benzene are not optimistic, with East China port inventories reaching 324,000 tons, surpassing historical highs. This inventory build-up has been ongoing since mid-October 2025, indicating a significant surplus [11]. - China's imports of pure benzene remain high, with October imports at 496,800 tons, a year-on-year increase of 14.5%, and November imports at 459,600 tons, a year-on-year increase of 5.93% [11]. - Downstream demand has been weak, particularly for styrene, which has seen a drop in operating rates from 76.54% to around 66.60% due to maintenance, while the second-largest downstream product, caprolactam, has also seen a decline in operating rates from 91% to 72% due to low profits [12]. Group 3: Future Outlook - Supply of pure benzene is expected to remain stable before the holiday, with maintenance primarily concentrated in late Q1 and Q2, leading to a gradual decrease in supply post-holiday [16]. - Demand may see a short-term rebound as styrene units are expected to resume operations, and the profitability of styrene suggests that planned maintenance may end on schedule or be completed early [16]. - The overall outlook indicates that while pure benzene inventories are currently tight, the potential return of downstream capacity could improve the weak market conditions, with a focus on changes in import volumes [16].