Insight: The Asian Benzene Market Will Maintain a Loose Supply Pattern in 2026

In 2026, the production capacity of benzene in Asia will continue to expand, but the ongoing capacity optimization in China and South Korea will moderately slow down the pace of expansion. Additionally, the downstream capacity is still in an expansion cycle, but the expansion rate of downstream capacity has significantly slowed down.

As multiple new cracking projects and the upgrades of some refining and petrochemical integration projects enter a high-speed development phase, the capacity for pure benzene in Asia will continue to expand in the coming years.

As the world's largest producer of benzene, China accounts for 38% of global capacity. In 2026, it is expected that five new benzene facilities will be put into operation, mainly concentrated in the fourth quarter, with an anticipated increase in effective capacity of 625,000 tons per year, representing a 2% growth compared to 2025.

This year, China is actively promoting "anti-involution" measures that will gradually eliminate outdated production capacity that has been in operation for more than 20 years. According to the ICIS supply and demand database, approximately 15% of the existing pure benzene capacity in China comes from outdated facilities that have been running for over 20 years, with 86% belonging to petrochemical plants under Sinopec and PetroChina.

In recent years, Sinopec and PetroChina have been vigorously promoting facility upgrades and renovations by building advanced refining and petrochemical integrated units to replace outdated equipment. Furthermore, although some plants have been in operation for over 20 years, the actual elimination of old capacity may be less than expected due to continuous renovations and replacements of core equipment during this period, and there remains uncertainty regarding the specific timeline and progress.

In addition to China, South Korea is actively promoting a petrochemical industry restructuring plan. According to an agreement reached between the South Korean government and ten major petrochemical companies, there is a plan to reduce ethylene production capacity by 25% through the shutdown of 3-4 cracking units. Specific details are yet to be further announced. In South Korea, about 29% of pure benzene capacity is produced via ethylene cracking processes. If a quarter of the pure benzene capacity closes along with the upstream ethylene units, it will result in a loss of approximately 500,000 tons per year of pure benzene capacity. However, S-Oil's plan to add 280,000 tons per year of pure benzene capacity is set to commence production in 2027, which will partially offset the capacity loss.

If all potential shutdown capacities in China and South Korea are realized, the total exiting capacity will amount to approximately 5.1 million tons, accounting for 9% of Asia's total capacity. The compound annual growth rate of benzene supply over the next five years will decrease from 2.8% to 1.8%.

As a by-product, the supply of existing pure benzene units depends on the economic efficiency of cracking units and PX units. With the commissioning of new cracking units, the operating rate of cracking units will continue to decline, which will reduce the supply of pure benzene from the cracking process route.

However, due to the favorable supply and demand situation for PX and sustained strong profitability, the operating rate of Asian PX units will remain above 80%, thereby stabilizing the benzene supply from reforming routes and toluene disproportionation routes.

From the demand side, the downstream capacity of pure benzene will still be in an expansion cycle in 2026. Styrene remains the main driver of pure benzene demand growth, followed by caprolactam, phenol, and aniline. However, the expansion pace of pure benzene downstream has significantly slowed down. Due to the pressure of oversupply in the downstream market, producers face long-term negative profit dilemmas, and there is a possibility of delays in the commissioning of newly expanded projects in the future. Coupled with the risk of global economic recession and increased international trade barriers, the export of terminal industries also faces certain resistance, further suppressing the growth of pure benzene downstream demand. It is expected that the demand growth rate for pure benzene in Asia will be about 1.6% in 2026, and the relaxed supply-demand situation will continue.

On the other hand, changes in global benzene trade flows have further intensified supply pressures in Asia. Since the fourth quarter of last year, the shrinking downstream demand in Europe has led to an increase in benzene surplus. Starting from June this year, European supplies have gradually entered the Chinese market, and by October, China's imports of European supplies reached 62,000 tons.

Furthermore, the arbitrage window between the US and Asia has been closed for a long time. Coupled with the 15% tariff imposed by the US on pure benzene imports from Japan and South Korea, it has essentially cut off the possibility of these sources flowing to the US. The quantity originally destined for the US from Japan and South Korea has largely shifted to China. Although the US-Asia arbitrage window reopened in mid to late November, this trend is difficult to reverse.

According to the ICIS supply and demand database, from January to October 2025, China's pure benzene imports reached 4.8 million tons, a year-on-year increase of 37%. Among these imports, South Korea accounted for 49% of the total, while Japan accounted for 6%. ICIS predicts that in 2026, China will continue to be the main target market for global excess pure benzene supply, with South Korea remaining the largest source of imports for China.