Significant negative impact of styrene ushered in a significant callback

In the first quarter, the global epidemic spread overshadowed the demand for energy, superimposed on the price war between Saudi Arabia and Russia, and the international oil price fell steeply. For the energy varieties, both from the cost side and the sentiment side, there was a significant negative. Styrene also welcomed Come to a big callback. After entering April, the news that OPEC and its production reduction allies restarted production cut talks boosted market confidence, the energy atmosphere turned warmer, and styrene prices also bottomed out. The main 2009 contract rose on April 9 up to 7.27%, leading the energy increase Plate. Below we will analyze future trends.

Rising raw material prices and enhanced cost support

 From the perspective of raw materials, the price of pure benzene accounts for about 60% of the cost of Styrene. The price of pure benzene and styrene are highly correlated and the trend is similar. Comparing the raw material prices in the past two months, it can be seen that the average price of pure benzene fell rapidly from about 5560 CNY/ton in February to 4124 CNY/ton in March, a decline of more than 25% year-on-year. At the same time, the price of styrene also fell from an average price of 6,685 CNY/ton in February to 5,486 CNY/ton in March, a decline of up to 18%. However, after entering April, the situation changed suddenly, and the price of pure benzene began to bottom out. On April 9, the price of pure benzene in East China rose close to 500 CNY/ton, which strengthened the support for styrene prices.

In addition, we need to pay attention to the impact of the spread of the global epidemic on raw material prices. As the world's second largest exporter of pure benzene, India's annual export volume is about 1.5 million tons, of which about 300,000 tons are exported to China, accounting for 9% of domestic imports. It has a significant impact on domestic and global supply. On March 24th, India announced that in response to the new coronary pneumonia epidemic, it will implement a “closing city” model across the country starting on March 25, 2020 for 21 days. According to official documents from India, except for some necessities production departments and emergency handling departments, nationwide commercial services, industrial production and public transportation will be suspended. Affected by this, some chemical production facilities in India have been declared closed. Considering that the epidemic in India is still at an early stage and facing huge population pressure, the further deterioration of the epidemic may affect more installations, and at the same time promote the further increase in raw material prices.

From the perspective of valuation, the fixed processing fee of mainstream enterprises is 1,000-1200 CNY/ton, calculated according to (0.79 * pure benzene + 0.29 * northeast Asian ethylene * 1.13 * 1.01 * exchange rate) +1200. In the first quarter of this year, styrene profit Continued decline, with a maximum loss of more than 1,000 CNY/ton, upstream companies have fallen negatively, and the operating rate in March fell to 62.8%, which is a significant decrease from the average of 85% in the same period last year. Although the profit has been repaired recently, the valuation is still at a low level and there is room for further improvement in the future.

Inventory began to fall, go to the warehouse expected to cash

 Since styrene imports are mainly concentrated in Jiangsu and Zhejiang, the inventory of East China's main port has a greater impact on the market. During the Spring Festival, the inventory of East China's main port has accumulated significantly, from the previous year's 139,000 tons to 258,000 tons in late March. On the one hand, due to relatively stable imports in the first quarter and increased port pressure; on the other hand, the impact of the spread of the epidemic on downstream demand is much greater than that of the downstream, which has delayed the progress of the destocking.

Judging from the import data of previous years, the import volume in the second quarter was generally at a low level during the year due to the overhaul of external disk devices. For example, the import volume in the second quarter of last year was around 500,000 tons, a decrease of 300,000 tons from the previous month. The reduction in imports will effectively ease port inventory. pressure. In addition, although the production pressure this year is unprecedented, in terms of months, the peak production will be concentrated in the first quarter and the fourth quarter. After Zhejiang Petrochemical and Hengli Petrochemical nearly 1.9 million tons of devices were put into production in the first quarter, there is no new in the second quarter. The increase in the production of equipment and the supply pressure has slowed down, which also has a positive boosting effect on the destocking of the port. Judging from the recently released data, the inventory of East China's main port has indeed shown signs of decline. The inventory data on April 8 fell by 15,000 tons from the previous month. With the gradual recovery of downstream demand, the pace of destocking is expected to continue.

The impact of the epidemic has weakened, and the downstream construction has improved

 As the three major carriages driving styrene demand, in 2019, the proportion of EPS, PS and ABS demand will not change much. Among them, the demand for EPS for styrene is around 2.9 million tons, accounting for 25%, a slight decline compared to last year, mainly due to the problem of overcapacity in the industry; the demand for PS for styrene is 2.66 million tons, accounting for 23%; ABS The demand for styrene is 2.6 million tons, accounting for 22%. In the first quarter of 2020, downstream enterprises are scattered because of their small size, and are more affected by the epidemic than upstream. Until late February, related enterprises will resume work and resume production one after another, considering the arrival of employees and the isolation time, after mid-March As a result, the start-up of downstream enterprises has improved rapidly. According to the survey, the resumption of work in East China and South China was good in March. Among them, the downstream factories in Jiangsu had a load of about 50% to 60%, and the downstream factories in Zhejiang had a load of 60% to 70%; the downstream factories in South China had a load From 60% to 70%, the pre-orders are mainly digested; while the demand recovery in the Northeast is slow, the overall construction load in Liaoning is only about 50%, mainly packaging companies, and most downstream factories in Heilongjiang are in a state of shutdown. Start one after another.

From the perspective of downstream profits, driven by the continuous plunge in styrene prices, the profits of the three downstream products continued to increase. At the end of March, the highest profits of EPS, PS and ABS all exceeded 1,500 CNY/ton, which was a significant increase compared to the same period last year, especially EPS, which almost doubled compared to the same period last year. Stimulated by high profits, construction in April is expected to increase further, and demand is expected to gradually recover.

On the whole, after entering April, the energy atmosphere has improved, the price of pure benzene has started to bottom out, and the raw material end support has been further strengthened. Although the pressure on the supply side of styrene is increasing day by day throughout the year, the pressure to put in new production capacity is less in the second quarter, and as the domestic epidemic situation is gradually controlled, downstream companies are stimulated by high profits and the construction load is expected to increase further. The trend is expected to be maintained, and styrene has a strong short-term trend. It is recommended to place more orders on the bargain contract in 2009. Risk factors: international oil prices, epidemic control, etc.