Analysis on styrene downstream products in 2021

In 2021, China domestic styrene downstream market remained volatile as a whole. Inflation, rapid fluctuations in crude oil market, rapid changes in raw material costs, and insufficient expectations for end-users’ demand continued to affect the trend of each products. In addition, the uncertain epidemic control in some areas and the impact of environmental inspections also increased the uncertainty of the short-term market. Moreover, the increase in the overall supply capacity from the raw material styrene to the downstream has also caused greater pressure on the demand side. The demand expectation was insufficient, and the apparent demand of some products has even experienced negative growth, which weighed on the overall market. Let’s briefly analyzes the changes of each product.

1. ABS: High benefit maintained, but expected to fall significantly.

The ABS market continued to fluctuate at highs for a long time after the rise in the first quarter of 2021. Although the price of feedstock styrene continued to rise during the period, the high benefit of ABS maintained. With the startup of Zhangzhou Chimei in September and the operating rate increasing gradually, China domestic supply capacity increased significantly. Also, the negative growth in overall demand throughout the whole year has greatly weighed on the market mindset. It’s difficult to support the ABS market even if the raw materials went higher as a whole and the oil price rose up intermittently. Moreover, the demand was sluggish and the support of supply and demand was insufficient, the ABS market continued to fall and profits declined evidently in the fourth quarter. Throughout the whole year, the overall benefit of ABS in 2021 was still good, but with the continuous decline of the market price, the decline of benefit is inevitable, and the stage of high benefits will cease to exist with the continuous release of China domestic production capacity in the future.

2. PS: the expansion of capacity has accelerated, and the benefit is shrinking.

The overall PS market in 2021 was significantly lower than that in 2020, especially in terms of profits. Although the market price was higher than in 2020 as a whole, PS benefits continued to narrow due to a greater increase in raw material styrene and the intensification of styrene turbulence. PS even faced a significant loss part of the time due to the lack of supply and demand support. From the perspective of supply and demand, the overall structural adjustment of PS supply and demand in 2021 was obvious. In 2021, there was a large expansion of production capacity, with an actual increase of 980kt and effective utilization of 780kt, including 100kt of Shandong Daoer, 200kt of Shandong Heze Yuhuang, 180kt of Huizhou Renxin, 400kt of Ningbo Liwan, 100kt of Shandong Lanhua I, and most of them were basically put into production in the fourth quarter. The actual China domestic supply capacity has increased significantly, which squeezed the import volume and intensified the internal competition. The profits continue to squeeze, and the drive of supply and demand to the market continued to weaken. In addition, due to the subsequent expansion of production capacity in the later period, the overall supply and demand structure of PS will continue to be adjusted.

3. EPS: raw material cost pressure increases, and production power weakens.

In 2021, the overall EPS market mainly tracked the movement of styrene, and the operating rates mainly adjusted according to profits and local environmental protection requirements. Since the oversupply pattern of EPS was maintained and the growth of end-users ‘demand was not as good as expected, the overall profit in 2021 declined year-on-year and the overall operating rate fluctuated greatly. In the late period, the EPS market will still track the movement of styrene.

To sum up, the overall benefit of styrene downstream products in 2021 shrunk significantly, the actual demand was not as good as expected and the rapid adjustment of supply and demand structure continued to affect the market trend of each product, and this situation will continue in the future. Among them, the production capacity of PS and ABS increased significantly. With the further increase of China domestic supply capacity, the pattern of squeezing imports and intensifying internal competition will continue to be maintained, and profits will continue to narrow. In the late period, the oversupply pattern of EPS will be intensified. Moreover, with inflation expectations maintained and crude oil rising overall, it is difficult for styrene to return to a lower level, and it will also be difficult for styrene downstream products to return to an overall high-profit situation. In addition, the demand growth is slow, and the operating rate of styrene downstream products, especially EPS and PE, will also be difficult to maintain high.