Global benzene and styrene trading is biased towards spot

In 2022, the global benzene and styrene market will generally be seriously affected by the macroeconomy. Due to the severe sluggish terminal demand, the downstream industry generated losses, causing the pure benzene and styrene industry to generally turn to spot trading. Market participants expect this to continue for a long time in 2023 until downstream markets everywhere improve.

The Asian market is biased towards spot trading

For the Asian benzene and styrene market, market participants expect a larger proportion of spot transactions in Asia and a lower proportion of fixed-term contract transactions in early 2023.

Producers prefer spot trading because the downstream market of the Asian benzene and styrene market is generating negative profits in the current economic context, and the signing of long-term contracts is not conducive to corporate profitability. However, the situation varies by category, and even if contract transactions decrease, benzene demand in Asia is expected to grow. Currently, benzene downstream capacity in Asia is expanding, with a large amount of styrene and phenol capacity coming online this year, accounting for almost half of benzene consumption in the region. However, benzene production will decrease at the beginning of 2023. As a result, spot trading is expected to become more active and cause more price volatility in early 2023. Until downstream demand recovers, fixed-term contracts will not become a potentially stable option.

In styrene, with a number of integrated petrochemical complex projects in Asia coming online, the region's exports to the rest of the world are also growing, putting significant pressure on independent producers in other regions. Increased production of styrene in the integrated petrochemical complex will also push smaller non-upstream and downstream integrated units to partner with larger facilities for more profit. Kate Lee, associate director of aromatics products at S&P Global, said: "In the current weak economic environment, Asian stand-alone styrene units may be phased out of the market. Styrene stocks are expected to remain low, while prices are likely to fluctuate. ”

The U.S. domestic styrene market is stable

For U.S. styrene companies in the first half of 2023, their styrene businesses will face many uncertainties. Market participants expect manufacturers to take bold moves to stay ahead of the curve in a rapidly changing market. For U.S. companies, the key factors are the development of raw material prices, demand in the domestic market, and arbitrage conditions in Europe.

Similar to Asia, U.S. styrene producers were affected by the sluggish downstream markets overseas in the second half of 2022. Michael McMurray, CEO of styrene producer LyanderBasel, said: "Styrene has started in the third quarter of 2022 with a very poor performance and we are not very optimistic about the long-term outlook for styrene. "From the perspective of the entire industry chain, with the rise in raw material prices, the profitability of styrene production in the fourth quarter of 2022 is not good. A market source said: "All styrene producers are at their lowest load ratio. "According to sources, in the third and fourth quarters of 2022, several production plants were suspended or closed at different points in time. This uncertainty will continue into the first quarter of 2023. However, market sources said domestic demand for styrene was relatively stable. Styrene producers targeting the U.S. domestic market are more optimistic than styrene producers whose main focus is on exports.

European producers enter the spot market

Market participants expect spot trading volumes in the European benzene and styrene markets to increase in 2023, as in Asia, and less enthusiasm for contract volumes from both producers and buyers. This sign has been visible since the second half of 2022. At the time, high energy costs challenged the profitability of benzene and styrene production in Europe. Affected by macroeconomic conditions, consumer demand has shown a downward trend, so that market participants are locked in contract supply, and the contracted amount is often larger than the market needs. In the case of styrene, the production spread in the second half of the year was as high as 500 euros/tonne, up from the historical 250 euros/tonne. Since then, Europe's two largest chemical producers have said that in the final months of 2022, the spread of styrene production exceeded the peak level of 500 euros / mt in Europe.

Market participants expect greater volatility in European benzene and styrene spot prices in early 2023 as the US and Asian benzene and styrene enter European arbitrage, as well as contract supply decreases. Of course, imports alone cannot meet the needs of the European market, but European benzene and styrene are not competitive with similar products in the United States. Market participants estimate that in the first quarter of 2023, the European benzene and styrene markets will enter a period of weak activity, the difficult market environment will continue into the summer, and the annual contract volume discussion will drag on until December 2023. A European benzene producer said that the key to the development of demand is changes in European gas prices, which continue to be affected by the Russia-Ukraine conflict.