Styrene market weakens after speculations on output reduction

Since the end of the short squeeze in October for benzene, the market price of styrene has been experiencing range-bound fluctuations, exhibiting a trend notably stronger than that of crude oil. The primary factors supporting this market trend are the low levels of port inventories and an increasing expectation of styrene plant shutdowns.

The industry profit for styrene has been in a state of severe loss, leading even mainstream integrated enterprises to struggle with unprofitability. The earlier commencement of downstream ABS/PS facilities exacerbated the loss of profits in the downstream sector, resulting in significant fluctuations in the operational status of the styrene industry due to the chain reaction of losses across the industry.

Shandong Lihuayi's 720kt/year styrene unit plans to shut down for maintenance for 2-3 weeks starting early December. Currently, due to significant losses in the ABS units, the run rate of its first ABS production line has been reduced. Satellite Petrochemical's 600kt/year styrene unit expects to undergo maintenance in December. Upstream ethane costs have risen due to congestion in the Panama Canal, which is expected to affect the operation of crackers in December. Additionally, SP Chemical's 320kt/year styrene unit plans to reduce its run rate in December, and Zhejiang Petrochemical's 1.2 million mt/year Phase II plant is scheduled for a 25-day rotational maintenance in December. One certain shutdown is Sinochem Quanzhou's 450kt/year styrene unit, planned for a month starting November 25th.

The root cause of these numerous uncertain shutdowns lies in the expanding losses in both styrene and its downstream industries.

Since the initial calls for shutdowns began, the effects have started to show. In November, the industry losses for styrene have narrowed to around 200 RMB/ton. By utilizing hydrogen sources comprehensively, it is now entirely feasible to achieve a turnaround in overall profits, although the downstream ABS sector's losses continue to have a significant impact.

This week, the total inventory at East China ports increased by 19kt to 54.3kt (excluding Jian-Tao and China Resources stocks). This included arrivals of 31kt and pickups of 12kt, with inventories at Jiangyin at 50.5kt, Zhangjiagang at 3kt, and others at 0.8kt. Commercial inventories stood at 34.9kt. The off-season for the EPS/PS industry has led to a reduction in demand and a slight increase in spot market supply.

In summary, the market is showing an overall weak trend, diverging from the pace of ABS plant commencements, which has led to sustained losses in industry profits, gradually reflecting in the increase of styrene spot supplies. Additionally, with CSPC's maintenance unit expected to resume operations in early December and an increase in supply, the recovery in industry profits for styrene is likely to lead to a reduction in shutdowns and operating rate reductions.