Styrene-Benzene Price Correlation Progressively Strengthens
China’s capacity of both benzene and styrene has undergone a rapid development cycle concurrently since 2019. Styrene supply is growing faster than demand, but benzene demand is growing faster than supply. As a result, the benzene market has a rather strong supply and demand structure, consistently compressing the profits of the styrene industry. The styrene industry started to experience losses in 2021, and the extent of those losses kept growing. The styrene industry was gradually constrained by costs, and the correlation between styrene and benzene prices got stronger over time. The high correlation encouraged spread betting between them and improved the trading models of the industry. The styrene industry was still under the grip of cost logic in the first half of 2024, and in the second half of the year, the situation may continue.
2020-2024 Styrene and Benzene Price Correlation Coefficient
2020-2024 Styrene-Benzene Price Spread
Shandong Zhongtai Chemical Technology and Jiangsu Hongwei Chemical plan to start up a total of 1,050kt/a of styrene capacity in the second half of the year. However, by the end of the third quarter or in the fourth quarter, there will be an increase in styrene maintenance units, which could somewhat offset the supply rise. About 3,000kt/a of new capacity is anticipated in downstream sectors, with the majority of it coming online in the fourth quarter. However, if the end demand is poor, the commissioning of downstream capacity can be postponed, which would decrease the demand support for the styrene market. Overall, compared to H1, the supply and demand structure for styrene might be weaker in H2 of 2024. Supply is a major variable affecting the price of styrene.
In terms of the benzene market, the second half of the year will see the addition of about 340kt/a of new benzene capacity. Regarding the import market, in South Korea and Japan, other than September, no additional maintenance plans have been discussed for the other months. The styrene maintenance capacity in the United States is expected to be limited, which may lead to a minor decrease in the demand for benzene. In summary, benzene imports in China are anticipated to rise in the second half of 2024. Demand-side, it is anticipated that in the second half of the year, 1,050kt/a of styrene capacity, 1,050kt/a of phenol capacity, 700kt/a of CPL capacity, and 360kt/a of adipic acid capacity will be put into service. Commissioning of new downstream capacity may be postponed if downstream industries’ profit losses worsen. However, compared to the styrene market, the supply-demand trend in the benzene market will continue to be greater.
In the second half of 2024, the cost will remain the main influencing factor of styrene price. Besides, Macro factors should be paid more attention. It is anticipated that the price spread between styrene and benzene may fluctuate in the range of RMB 450-900/mt, with fluctuations caused by changes in the supply-demand structure of the two products.
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