Styrene Does Not Have The Foundation For A Deep Fall

Affected by the collapse in costs, styrene futures have continued to fall since peaking in mid-October. Since December, styrene futures have bottomed out and rebounded, but the indicators have weakened, and the rebound has been under heavy pressure. On the whole, in the context of weakening of cost support, increasing market supply, and no bright spots in downstream demand, styrene is unlikely to show a trending market, and there is a greater possibility of weak oscillation.

Pure benzene operating load rises

As of December 13, the domestic port inventory of pure benzene was 162,000 tons, a decrease of 77,000 tons from the same period last year and a decrease of 32.22% year-on-year. The low inventory has caused the market to push up the price of pure benzene in the early stage. However, with the recent recovery of the supply side, the tight supply of pure benzene has been improved and the price has also fallen.

Affected by the resumption of production of the preliminary maintenance equipment, the domestic supply of pure benzene increased. As of December 17, the domestic petroleum benzene operating load was 78.1%, an increase of 1.4 percentage points from last week; the benzene hydrogenation operating load was 55.1%, an increase of 5.9 percentage points from last week. At present, pure benzene production enterprises are basically in a state of meager profit. The average profit is operating in the range of 100-200 CNY/ton. At the same time, the tight supply of crude oil is gradually alleviated, and the center of gravity of oil prices has moved downward, which will affect the price of pure benzene. A certain degree of suppression is produced, and the supporting effect of the cost end on Styrene begins to weaken.

　Improved production and management conditions

With the drop in the price of pure benzene, the production and operation of styrene enterprises have been improved to a certain extent, and their losses are shrinking. As of December 17, the average loss of domestic styrene production enterprises was 138 CNY/ton, a decrease of more than 100 CNY/ton from the previous period. The improvement of production and operation conditions stimulated production enterprises to increase their operating load. As of December 16, the average operating load of domestic styrene production enterprises was 77.01%, a decrease of 1.01 percentage points from the same period last year, but an increase of 5.47 percentage points from the low point in mid-November. From the end of December to the beginning of next year, there will be a number of sets of styrene plants that have been overhauled in the country, and the domestic supply will rise steadily by then. At the same time, Shandong Wanhua's 650,000-ton plant is expected to be put into operation at the end of the year, and there is an incremental supply of styrene capacity, which is expected to improve the current tight supply.

At present, domestic styrene port stocks are higher than the level of the same period last year, which will have a depressing effect on styrene prices. As of December 9, the inventory of domestic styrene manufacturers was 155,200 tons, an increase of 47.47% from the same period last year. Styrene port inventory was 106,400 tons, an increase of 38,300 tons from the same period last year, an increase of 56.24% year-on-year. Among them, East China port inventory was 94,200 tons, an increase of 53,000 tons compared with the same period last year, an increase of 128.64%; South China port inventory was 12,200 tons, a decrease of 14,700 tons compared with the same period last year, a year-on-year decrease of 54.65%.

Demand shows a downward trend

According to the market situation, the start-up load of the styrene downstream industry has differentiated, and the overall downstream demand has shown a downward trend. As of December 16, the operating loads of domestic EPS and ABS manufacturers were 52.22% and 92.11%, respectively, down 3.38% and 7.89% from the same period last year; the operating loads of PS, UPR, and styrene butadiene rubber were 78.18% and 78.18%, respectively. 36% and 77.09%, up 12.91%, 1% and 15.15% respectively over the same period last year.

EPS: terminal demand continues to weaken, and production profits remain at around 300 CNY/ton. Domestic EPS manufacturers have reduced their load under the background of insufficient orders and poor profits. Supply has fallen, and corporate inventories have fallen accordingly. Up to now, the domestic packaging materials start-up load is 40%-50%, the North China insulation board start-up load is 30%, and the downstream start-up load in the northeast and northwest is about 20%. In short, EPS presents a situation of weak supply and demand, and there is an expectation of further decline in operating load.

PS aspect: domestic PS production is profitable, among which GPPS production profit is 835 CNY/ton, HIPS production profit is 1,827 CNY/ton, although both are lower than the same period last year, but domestic PS production enterprises have a higher operating load than the same period last year. However, due to the impact of the epidemic, the operating load of PS production companies has also dropped significantly, and the supply will decline in the later period, thereby reducing the demand for styrene.

ABS: Affected by the epidemic, LG Yongxing's construction load dropped. As of the week of December 17, the domestic ABS starting load decreased by 4.71% month-on-month, and terminal demand was also affected to some extent, resulting in an increase in ABS inventory to 197,300 tons, an increase of 8.71% month-on-month. Not only that, although the profit of ABS is still at a high level at present, it has declined compared with the previous period, and has fallen to 4000 CNY/ton. In addition, the terminal demand performance is average, and the company's enthusiasm for stocking in the later period will gradually decrease.

From the above aspects, the downstream of styrene has been affected more or less by the epidemic, and the operating load has decreased. In addition, near the end of the year, market orders are insufficient, overall demand is average, corporate profits are declining, and corporate production enthusiasm is reduced, and demand is difficult to improve significantly.

Based on the above analysis, the current fundamentals of styrene are mainly bearish. First, the upstream supply of pure benzene has increased, the price has room to fall, and cost support has weakened; second, the start-up load of styrene has risen, the inventory is higher than last year's level, and the supply is sufficient; third, the downstream demand has not improved significantly. However, because styrene production is still at a loss, styrene futures do not have the basis for a deep decline. Based on the above judgment, the author believes that the styrene price is likely to fluctuate weakly. It is recommended to wait and see in the short-term and wait for the emergence of new contradictions in the market.