Severe oversupply, limited upside space for styrene

From a cost perspective, the upward momentum of the crude oil market has been significantly weakened recently. In the medium and long term, considering that the oversupply of styrene will be serious in 2021, it is expected that the upward space of styrene will be limited.

　　 As the Spring Festival is approaching, the downstream procurement demand for styrene is better, and mainstream downstream production and sales still maintain a certain profitability, which will bring benefits to the market.

　　 Spot oscillates upward

　　 Since late December 2020, the trend of styrene disk has shown a V shape. As of mid-to-late January 2021, in the domestic market, the average price in the East China market was 6,721 CNY/ton, an increase of 3.92% from the previous month; the average price in the South China market was 7,045 CNY/ton, an increase of 5.54% from the previous month; the average price in the North China market was 6,815 yuan /Ton, up 4.44% month-on-month. Recently, the overall performance of the domestic styrene spot market has fluctuated upward, but the increase is limited.

　　 Internationally, prices in the Asian market showed an upward trend, mainly because non-integrated device companies turned losses into profits and brought certain support to the market. The European market is also showing a continuing upward trend. On the one hand, the spot supply of styrene is tight; on the other hand, the downstream demand for styrene is performing well, which supports the market. The US market is also showing an upward trend, mainly because the US expectation of strengthening economic stimulus has boosted market confidence. In addition, styrene raw materials and the demand side have supported styrene prices.

　　 Basis keeps returning

　　 The styrene market started to rebound since the beginning of 2021. On the one hand, international crude oil prices continued to rise, and the cost-side support was strong; on the other hand, mainstream downstream production and sales remained profitable, and downstream procurement demand performed well before the Spring Festival. In terms of basis, starting from mid-to-late November 2021, the basis has weakened significantly. The East China basis once fell to a negative value, with the lowest falling to -93 CNY/ton. As of January 20, 2021, the main EB2102 contract's basis for the mainstream price of the East China market is -30 CNY/ton, and the basis for the mainstream price of the South China market is 225 CNY/ton; the far-month EB2103 contract's basis for the mainstream price of the East China market is- 3 CNY/ton, the mainstream basis for the South China market is 252 CNY/ton. At present, the styrene basis has basically returned to the level before the National Day and Mid-Autumn Festival in 2020.

　　 keep profitable downstream

　　 At present, only the ABS industry in the three major downstream markets maintains a high operating rate. Although the operating rates of other industries are not high, they are still recovering from the end of 2020. At the same time, as the Spring Festival approaches, the downstream market of styrene has stocking expectations, and the demand side performs relatively well. As of mid-to-late January 2021, domestic EPS production was about 69,900 tons, an increase of 2800 tons from the previous month, an increase of 3.96%; the operating rate of installations was about 57.56%, an increase of 2.35 percentage points from the previous month, and the overall operating load increased slightly; The increase was an increase of 155 CNY/ton from the previous month, an increase of 17.61%. The weekly output of the domestic PS industry is about 56,100 tons, and the operating rate is 71.49%, an increase of 2.01 percentage points from the previous month. The average profit of the PS industry is around 1,215 CNY/ton. The total weekly output of the domestic ABS industry was 82,500 tons, the same month-on-month, and the industry operating rate was 102.4%. The ABS industry is currently operating at full capacity. The average gross profit of the domestic ABS industry is 5,310 CNY/ton. Overall, downstream production and sales still maintain a certain level of profitability.

　　 In summary, styrene futures have shown an upward trend as a whole recently, but we expect the overall gains in the later period to be limited. The upward momentum of international crude oil has significantly weakened. Although there is still some support for styrene prices, there are signs of weakness. In the long run, the domestic styrene supply oversupply pattern will become more serious in the case of the reduction of overseas equipment maintenance losses, the large release of domestic production capacity and the insufficient follow-up of new downstream demand.