Enriching Chemical Futures System Styrene Futures Listing Imminent

Styrene, a petrochemical product far and near to our life, is coming to futures investors. It's far away because styrene is a dangerous chemical and its chemical properties are unstable. Many people have limited knowledge of it. In fact, it is so close to our daily life. From the disposable foam packaging to the automobile tires and the electrical apparatus shell, there are styrene products behind these common products. The price fluctuation is not "normal" because it is widely used in various fields. In fact, in recent years, the price of styrene fluctuates violently, often beyond the expectation of the industry, and even is called "the devil variety" by the industry. On September 26, styrene futures will be traded on the Dalian Stock Exchange.

The forthcoming styrene futures listed in can enrich China's chemical futures system and provide safe haven for service entities. As a new starting point of futures market serving the real economy, styrene futures shoulder the responsibility of hedging risks and escorting the styrene industry. It is well known that the price of styrene fluctuates violently in the petrochemical industry. Taking the price of styrene in East China as an example, from 2014 to 2018, the price fluctuations are 88.6%, 68.4%, 55.7%, 48.8% and 66.7% respectively. The factors affecting the price of styrene include not only the upstream raw materials such as crude oil, ethylene and pure benzene, but also the supply-demand relationship of downstream products such as EPS, PS and ABS, the start-up of production and consumption enterprises and the social stock situation, which also have an impact on the price of styrene. Zhou Jun, deputy general manager of Nantong Chemical Light Industry Company, told China Securities News that in September 2008, the price of styrene was around 11,000 yuan per ton, followed by a sustained downward trend of 300-400 yuan per day. A month later, it fell to more than 4000 yuan per ton. "If there were futures instruments to hedge at that time, we could avoid risks in time, but at that time all kinds of means and measures were lacking, many enterprises could only sell and cut warehouses, the lower the price of chopping warehouses." In fact, he recalls, the price of more than 4,000 yuan is bottoming out, and has nothing to do with cost, but there is no way, many enterprises are panic selling. But after throwing it away, it suddenly found that the supply in the market was decreasing, and the price began to rise rapidly, and soon returned to the level of 8000-9000 yuan per ton.

"This is a bloody example, because there is no futures instrument, the loss of industrial customers is particularly large." Zhou Jun said that many factories lost money before they started to produce raw materials, and there was no way downstream to hedge and transmit risks effectively.

Since late October 2016, styrene has ushered in another upsurge. At that time, the Styrene Market in Jiangsu region rose strongly, ignoring factors such as the continuing downward ethylene market, falling international crude oil and the coming off-season demand. This round of rising trend, the vigorous rise, the large increase, far beyond the expectations of industry insiders. During the two consecutive trading days on November 3 and 4, the market grew by 400 CNY/ton and 300 CNY/ton, respectively. Many people in the industry exclaimed that after many years of silence, the "devil nature" of styrene appeared again. Zhu Shunlin, Vice President of Shuangliang Group and Chairman and General Manager of Jiangsu Lishide Chemical Co., Ltd., told China Securities News that in recent years, with the tightening of safety and environmental protection inspection, chemical enterprises are facing parking and burden reduction risks. In terms of price, upstream prices have risen sharply, and enterprises are also facing the risk of shrinking profits. At the same time, the price of styrene has fallen sharply, the sales pressure is high, and the inventory risk has been accumulating.

Under the background, the voice of industrial enterprises for listed futures is rising day by day. At the same time, Styrene futures contract system, delivery standards and delivery area settings are in line with the characteristics of varieties and spot trade habits, which also makes the industry full of expectations for this new variety.

Global market

Relevant data show that China is not only the largest styrene producer in the world, but also the country with the largest global demand. "In 2018, there are 45 styrene production enterprises in China, with an annual capacity of 9.26 million tons and an output of 7.68 million tons, accounting for about 25% of the world. In recent years, China has orderly promoted the domestic privately-run refining and chemical integration projects. At present, there are 70 million-grade refining and chemical integration projects in China, such as Hengli, Zhejiang Petrochemical Company, Shenghong Petrochemical Company and Xuyang Petrochemical Company, which have been approved into the construction peak period. Later, with the expansion of styrene production capacity, domestic styrene can achieve self-sufficiency.

From the global point of view, styrene production is a slow growth trend, Northeast Asia is the largest production and marketing region, China, Japan, South Korea and other apparent consumption in Northeast Asia can account for about 56% of the world, is the largest production and marketing region in the world. Over the past 10 years, China's production capacity and output have maintained a high-speed growth trend of more than 10%, and its import volume has gradually decreased. Apparent consumption grew at a relatively high rate, with an average annual growth rate of 5.3%. The degree of external dependence dropped from about 50% a decade ago to about 27% at present. According to the existing statistics, around 2021, import sources will completely withdraw from the domestic market. It is reported that the position of the styrene industry chain is very important. There are many enterprises involved in the upstream and downstream. At present, there is still no effective mechanism for price discovery in the industry. The price of both buyers and sellers is still integrated through negotiation or referring to the price of electronic discs, the price of upstream or downstream products, and inventory. Consider the price formed. At present, the domestic styrene industry sales mode is mainly about the length, supplemented by a small amount of spot export. Most factories are 70% to 80% long, with less spot sales.