Styrene Jun/Jul spread firms on tight balance

Since early April, in the wake of declining crude oil prices, the price of styrene has continued to experience a downward trajectory. The spot price at ports has declined, from a high of around CNY 8760 per ton, to approximately CNY 7900 per ton. However, during this period of decline, several middle traders and downstream factories have remained active in the market, resulting in a temporal surge in trading volume. Simultaneously, the balance between styrene production and consumption in the downstream sector has become relatively tight, leading to a notable strengthening in EB2306/2307 spread.

As upstream benzene prices rapidly decline, the styrene industry has experienced a swift recovery in profitability, marking the first time since the Spring Festival. The port inventory of benzene continues to maintain a high level of over 200,000 tons, and the decline in demand for gasoline blending has resulted in price decline of aromatics, leading to an accelerated decline in benzene production. Owing to the profitability recovery of the styrene industry, the non-integrated plant New Solar has resumed production, while the other non-integrated plants may also resume operations.

As the restart of ZRCC Lyondell, the turnaround completion of Bora and Fushun Petrochemical, as well as the resumption of New Solar, the operating rate of the styrene industry has recovered to a high point of 73%. However, starting in late May, domestic units will undergo significant maintenance, and production is expected to slowly recover in mid-June. Domestic supply may be lower than expected but the absolute inventory level will remain at a new high.

As domestic supply may be lower than expected, the tightness may continue in May-June until the supply increases in July. South Korea's maintenance is expected to be fully completed by the end of June, and June's export negotiations are ongoing, with high export volume expected. The tight balance in May and June has also supported the strengthening of EB2306/2307 and EB2307/2308 spreads, but which are also limited by the inventory accumulation in the far months. Apart from the bullish trend driven by favorable supply-demand fundamentals, unilateral declines in the price of styrene have also spilled over into the spread trends.