Benzene

Benzene Global Market Outlook:

• The global market is expected to grow at a CAGR of 1.5–2.0 percent during 2022–2025: The impetus for this growth comes from demand in Asia, which is expected to grow at 2.5–3.0 percent, due to high automobile and construction activities, with increased disposable income values

• Feedstock change in the western markets to yield less benzene: Lesser yield from lighter feedstock will continue to reduce the output of aromatics in the US and the EU, thus making the regions increasingly import dependent. This demand from the western markets will be met by surplus capacity additions, planned in the Middle East and Asia through 2022

Global Market Size: Benzene

• The global benzene market is expected to grow at a CAGR of 1.7 percent during the forecast period, driven by a healthy demand for downstream phenol, styrene, and cyclohexane from the automotive, construction, and household durables sector

• A key growth contributor for the global benzene market is the rise in demand from the polyester industry, where styrene monomer is used for manufacturing textiles

• Major demand growth is expected from the Asian region, due to the increasing amounts of disposable incomes, resulting in a rising demand from the automotive and household durables sector for phenol and styrenics

Global Capacity–Demand Analysis

• Current market scenario (supply): Global benzene supply was witnessed to be limited in April 2022, as key companies shut down plants for maintenance. However, the Global supplies have remained higher in H2 2022 amidst bearish global demand and rising inflationary pressures

• Demand trends: Asian benzene supply is expected to tighten over the next five years, due to the downstream styrene capacity additions in China and South Korea, which is expected to increase the regional demand. Global demand is expected to remain healthy from the automotive and construction sectors, with an expected decline from the packaging sector

Market Outlook

• Decreasing gasoline production to impact domestic benzene supply: A decline in gasoline production and switching to lighter feedstock, in the US, are expected to pull down the benzene production

• On-purpose benzene production depends on conversion margins: Voluntary production of benzene using toluene depends on the margins between toluene and benzene. Firm gasoline-blending demand for toluene is expected to keep the margins unattractive in the western market, whereas in Asia, it is expected to remain healthy

• Capacity additions planned in the Middle East and Asia: Major refinery expansion planned in the Middle East and Asia is expected to increase the availability of benzene for the export market

Engagement Outlook

• Two-year long contract with half-yearly price revisions: In the US and the EU, players can engage with two-year long contract with half-yearly price revisions

• Spot buying is preferred in Asia: The consumers buy industrial-grade benzene and convert it in-house for their personal care applications

Porter's Analysis on Benzene (NA and Europe)

Supplier Power

• Aromatics comes predominantly as a by-product in crude refining in the western markets: Production of benzene is quite low in the West as against Asia, where BTX units are set up.

• Benzene is mainly produced as a co-product in refinery gasoline stream and during production of steel as COLO. So, the industry is technically backward integrated, which results in complete control over the supply chain

Barriers to New Entrants

• Huge capital cost on the back of changing feedstock dynamics, due to the shale gas advent: Barrier for entrant is higher, due to the high capital cost involved in plant set up. The US has shifted to gas-based setup, which puts the benzene sector at a disadvantage

Intensity of Rivalry

• Integrated facilities and import dependency: Comparatively, consolidated industry with complete control over the value chain starting from crude oil or naphtha

• However, availability of material from Asia adds to the supply options for buyers, thus increasing the rivalry among domestic producers for the market share

Threat of Substitutes

• There are no substitutes available for benzene in the derivative markets

Buyer Power

• Buying power is low for small volume buyer (personal care product manufacturers): Mostly, benzene producers are forward integrated with high demand derivatives, like styrene and cumene. Thus, benzene availability for other niche segments remains tight

• For instance, personal care and pharma- grade benzene command only about 2–3 percent of the total benzene demand, and so, the buyer power is very low