Styrene Industrial Chain Profit Expanded in Aug
Entering August, the profits of the styrene industrial chain were gradually transferred downward, and the overall profits of the industrial chain were expanded. What is the reason for the change?
The high-speed expansion of the industrial chain collides with the weak terminal demand, leading to the profit contraction of styrene and upstream and downstream products in the first half of 2022. In August, the capacity expansion of the industrial chain is still in progress, and the terminal demand remains weak compared with the same period of last year. However, the overall profit of the industrial chain has ended the narrowing trend and began to expand. In addition, the industrial chain profit began to transfer to the downstream markets. What factors drove the changes of the industrial chain and whether it can continue to play a role in the future?
In 2022, the profits of styrene and upstream and downstream industries shrank rapidly, as shown in the figure above. In July, the cumulative value of the theoretical profit margin of styrene and five items in the upstream and downstream was 10.90%, which was significantly lower than the highest theoretical profit rate of 76.92% in September 2021. Meanwhile, the profit margin of upstream benzene increased rapidly from - 6.43% in March 2022 to 16.76% in July.
In August, the cumulative value of the overall profit margin of the industrial chain ended the narrowing trend and was expanded. In the first half of August, the cumulative value of the industrial chain profit margin expanded to 18.78%, an increase of 7.88 percentage points over July. At the same time, the profits of the industrial chain began to transfer to the downstream industries, and the profit margin of downstream PS, ABS and EPS reached 39.12%, far higher than the 3.95% in July.
In the process of profits transfer in the industrial chain, the profit margin of styrene remained relatively stable. The average profit margin from January to July 2022 was - 5.02%, and that in the first half of August was - 8.71%.
The change of industrial chain profit is the result of multiple factors such as cost, supply and demand.
Since the middle of June, the prices of styrene and upstream and downstream commodities have dropped rapidly. In the end of July, the decline in styrene and benzene prices further expanded, but the prices of downstream PS, ABS and EPS showed resistance. From the table below, we can see that during the decline from mid-June to the end of July, the price correlation coefficient between styrene and downstream PS, ABS and EPS has risen to more than 0.80, while from the end of July to the middle of August, the price correlation between styrene and downstream products has significantly weakened. This indicates that the downward cost transmission force of styrene has weakened, supporting the improvement of the profits of downstream products.
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