Styrene Industrial Chain to Usher in Intensive New Capacity in H1, 2023
In 2022, the geopolitical situation, the Federal Reserve's monetary policy and other factors dominated the trend of styrene price at some stage. In 2023, the impact of macro factors will still be prominent. At the same time, the supply and demand variables will increase, and the impact on the price will be enhanced periodically.
In 2022, the cost transmission was the main driver affecting styrene price trend. While from August to November 2022, when the cost transmission impact weakened, the impact of supply and demand on styrene prices increased.
2022 Styrene Price Driver Analysis
Macro factors in 2023
At the end of 2022, the Fed's interest rate increase has slowed down. With the improvement of the U.S. inflation data, the expected impact of the market on the interest rate increase has waned. However, players need to note that the interest rate in 2023 will remain at a high level, and commodities may still be under pressure. At the same time, China’s domestic macro outlook has improved since the end of November 2022, which will continue to bolster the market. At the beginning of 2023, players need to pay attention to the recovery of terminal demand.
Upstream & downstream newly added units in H1 of 2023
In 2023, the upstream and downstream markets of the industrial chain will usher in more intensive new capacity compared with that in 2022, and the influence on prices may be further enhanced. In the long term, in the next five years, the newly added capacity of downstream PS, EPS and ABS industries will exceed that of styrene industry. From the table below, we can see that in the first half of 2023, the newly added capacity of downstream PS, EPS and ABS reached 5.03 million mt/a, far greater than 2.7 million mt/a of styrene. However, the characteristics of the downstream projects are different from that of styrene. Most of the downstream PS, EPS and ABS units are equipped with multiple production lines, and the production lines are generally put into production one by one. Therefore, the demand for styrene will be gradually released. At the same time, the unit consumption of styrene for downstream ABS is as high as around 0.63. Therefore, it is still necessary to pay attention to the changes in supply and demand pattern caused by the commissioning time difference between new styrene units and new downstream units.
H1 2023 Styrene Industrial Chain Newly Added Unit
In the first half of 2023, the price of styrene may show an irregular N-shaped trend. In the first stage, the styrene price is expected to trend up, because the market will continue to be affected by the expectation of macro improvement. In the second stage, weak demand will drag down the market price. In the third stage, with the marginal improvement of the demand and the gradual release of new capacity in the downstream market, the supply and demand relationship may improve, supporting the styrene price to rise.
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