Global pure benzene and styrene trading biased towards spot

In 2022, the global pure benzene and styrene market will generally be severely affected by the macro economy. Due to the severely sluggish terminal demand, the downstream industries have incurred losses, making the pure benzene and styrene industries generally turn to spot trading. Market participants predict that in 2023, this situation will continue for a long time until the downstream markets in various places improve.

Asian markets favor spot trading

Regarding the pure benzene and styrene markets in Asia, market participants expect that there will be a larger proportion of spot transactions in Asia in early 2023, and a lower proportion of fixed-term contract transactions.

The reason why manufacturers prefer spot trading is that under the current economic background, the downstream markets of Asian pure benzene and styrene markets have negative profits, and signing long-term contracts at this time is not conducive to corporate profitability. However, the situation of each product category is mixed, even if the contract transaction volume is reduced, the demand for pure benzene in Asia is still expected to grow. At present, the downstream production capacity of pure benzene in Asia is expanding, and a large amount of styrene and phenol production capacity will be put into production within this year, accounting for almost half of the pure benzene consumption in the region. However, in early 2023, pure benzene production will decrease. Therefore, it is expected that spot trading will become more active in early 2023 and cause more volatility in prices. Until downstream demand recovers, term contracts are not a potentially stable option.

In terms of styrene, as multiple integrated petrochemical complex projects in Asia have been put into production, the region's exports of related products to other parts of the world are also increasing, thus putting enormous pressure on independent producers in other regions. The increase in styrene production in integrated petrochemical complexes will also push those smaller non-integrated upstream and downstream units to cooperate with larger facilities in order to strive for more profits. Kate Lee, deputy director of S&P Global Aromatics Products, said: "Under the current weak economic environment, independent styrene plants in Asia may gradually withdraw from the market. Styrene inventories are expected to remain low, while prices may fluctuate."

The US domestic styrene market is stable

For American styrene companies in the first half of 2023, their styrene business will face many uncertainties. Market participants expect manufacturers to take bold actions to stay ahead of the fast-changing market. Key factors for US companies are developments in raw material prices, demand in the domestic market, and arbitrage conditions in Europe.

Similar to Asia, in the second half of 2022, U.S. styrene producers will be affected by the sluggish overseas downstream market. Michael McMurray, chief executive of styrene producer LyondellBasell, said: "Starting in the third quarter of 2022, styrene has performed very badly, and we are not very optimistic about the long-term prospects for styrene." From the entire industry From a chain perspective, with the rise in raw material prices, the profitability of styrene production in the fourth quarter of 2022 is not good. “All styrene producers are operating at minimum load rates,” a market source said. According to sources, multiple production plants were suspended or closed at various points during the third and fourth quarters of 2022. This uncertainty will continue into the first quarter of 2023. However, domestic demand for styrene in the United States is relatively stable, market sources said. Styrene producers targeting the U.S. domestic market are more optimistic than those focused primarily on exports.

European producers enter the spot market

Market participants predict that, similar to Asia, the spot trading volume of the European pure benzene and styrene market will also increase in 2023, and the enthusiasm of producers and buyers for contract trading volume will weaken. This sign has appeared since the second half of 2022. At the time, high energy costs were challenging the profitability of pure benzene and styrene production in Europe. Affected by the macroeconomic situation, consumer demand shows a downward trend, making market participants locked in contract supply, and the contracted quantity is often larger than the market demand. As far as styrene is concerned, the production price difference in the second half of the year was as high as 500 euros/ton, which is higher than the historical figure of 250 euros/ton. Since then, the two major European chemical producers have stated that in the last few months of 2022, the price difference between styrene production has exceeded the peak level of 500 euros per ton in Europe.

Market participants predict that as the US and Asian benzene and styrene enter Europe for arbitrage and contract supply decreases, the spot prices of pure benzene and styrene in Europe will experience greater fluctuations in early 2023. Of course, it is impossible to meet the needs of the European market solely by imports, but European pure benzene and styrene are not competitive with similar products in the United States. Market participants estimate that in the first quarter of 2023, both the European pure benzene and styrene markets will enter a period of weak activity, the difficult market environment will continue until summer, and the annual contract volume discussion will be delayed until December 2023. A European pure benzene producer said that the key to demand development was changes in European gas prices, which continued to be affected by the conflict between Russia and Ukraine.