Demand ushered in a seasonal decline Styrene is difficult to continue to rise

The basic fabric weakens

Styrene will usher in an intensive period of resumption of production and new production, while demand will usher in a seasonal decline, and styrene prices are expected to continue to rise. At the same time, the future demand for upstream raw material benzene is better than styrene, so the subsequent styrene profit is likely to be squeezed, and the arbitrage transaction between styrene and benzene can be considered in the future.

Since December, styrene futures prices have generally shown an oscillating upward trend. From late November to early December, styrene plants such as Xinpu Chemical, Sinochem Quanzhou and Tianjin Dagu were overhauled, and domestic styrene supply contracted month-on-month. At this time, styrene downstream ABS and PS industries began to operate at a high level, and some downstream devices were put into production, so that the rigid demand for styrene performed well. The positive supply and demand sides, coupled with the overall strong sentiment of commodities, pushed the price of styrene higher. The cash flow of the styrene non-integrated unit has recovered from around 70 CNY/ton at the end of November to about 500 CNY/ton at present. However, there will be some changes in the supply and demand of styrene in the future, and the basic fabric will weaken.

The price lacks conditions for continued strengthening

Styrene supplies are gradually increasing. Sinochem Quanzhou and Anqing Petrochemical's styrene plants are expected to restart in mid-December, involving 550,000 tons of styrene per year, and by the end of December, styrene plants with an annual capacity of about 530,000 tons such as Maoming Petrochemical and Yangtze Bass are expected to restart, and the domestic styrene market supply is expected to increase in the future. At the beginning of 2023, Lianyungang Petrochemical's 600,000-ton styrene plant and China's Guangdong Petrochemical's 800,000-ton styrene plant totaling 1.4 million tons are expected to be put into operation, in addition to Zibo Junchen New Materials, Zhejiang Petrochemical Phase II, Ningxia Baofeng and other styrene plants totaling about 1.3 million tons are expected to be put into operation in the first quarter of next year.

Styrene market demand is expected to weaken. Although the current ABS and PS industry starts at a high level, as the year approaches, the styrene downstream EPS industry is affected by factors such as low temperature and low season in winter, and the start material will decline seasonally. From the historical data, around the Spring Festival from 2018 to 2021, the output of the EPS industry has shrunk to varying degrees, and the average monthly output of the EPS industry from 2018 to 2019 is about 250,000 tons, but the monthly output of the EPS industry in February 2018 is 140,000-150,000 tons, and the monthly output of the EPS industry in February 2019 is about 160,000 tons. From 2020 to November 2022, the average monthly output of the EPS industry was around 305,000 tons, but the monthly output of the EPS industry fell to about 78,000 tons at the beginning of 2020, to about 180,000 tons at the beginning of 2021, and to about 194,000 tons at the beginning of 2022. In addition, we compared the historical data of styrene East China Port and the three major downstream industry finished product inventories, and generally showed an accumulation trend, so it is expected that the next styrene market demand is likely to gradually weaken.

Benzene fundamentals are better than styrene

The main raw material of styrene is pure benzene, and at the end of the year, Shenghong Refining and Fuhaiwei Lian had a total annual production capacity of about 1.6 million tons of pure benzene new plant put into operation, and the recent arrival of pure benzene imports is good, and the overall supply of the domestic pure benzene market is gradually increasing. In the future, the demand for pure benzene market will improve. Around the end of the year, it is expected that new plants in the downstream styrene and phenol industries of pure benzene will be put into operation, such as the aforementioned Lianyungang Petrochemical, Guangdong Petrochemical, Zibo Junchen New Materials, Zhejiang Petrochemical Phase II, Ningxia Baofeng and other styrene plants with an annual production capacity of about 2.7 million tons. Another downstream phenol industry of pure benzene, Wanhua Chemical's 650,000-ton plant has been put into operation, and a total of 1.3 million tons of phenol production capacity of Shenghong Refining and Jiangsu Ruiheng is expected to be put into operation at the end of the year, which is expected to increase the market demand for pure benzene. Therefore, in the long run, the fundamentals of benzene will be better than styrene.

On the whole, short-term styrene supply reduction, downstream rigid demand to maintain a high level of styrene prices, while the improvement of domestic macro expectations has driven the overall strength of commodities including styrene, but with the recovery of prices, styrene profits have improved significantly, subsequent styrene will usher in a period of resumption of production and new production intensive, and demand ushered in a seasonal decline, styrene prices are expected to continue to rise. At the same time, the future supply and demand of upstream raw material benzene is better than styrene, so the subsequent styrene profit is likely to be squeezed, and the arbitrage transaction between styrene and benzene can be considered in the future.