Styrene Market Strong in Sep on Growing Demand
Since mid-to-late August, the impact of supply and demand change on styrene prices has increased. Contrary to the expectation that the supply and demand will weaken, the supply and demand relationship of styrene continued to improve, which provided the core driving force for styrene price rise.
Influence of cost on styrene prices weakened.
Different from the early stage, the cost conductivity of crude oil and benzene to styrene decreased significantly in the middle and late August. As shown in the following table, the correlation coefficients between crude oil and benzene, benzene and styrene are -0.29 and 0.09 respectively, which is completely different from the performance in the rising trend from mid-March to mid-June and the falling trend from mid-June to mid-August.
From mid-August to now, the crude oil market has been weak, and the benzene price has remained range-bound. On the contrary, styrene prices rallied from RMB 8,225/mt in late August to RMB 9,750/mt on September 19, an increase of 18.54%. Besides, the prices of downstream GPPS, EPS and ABS also trended up following the rise in styrene price, but the increase was smaller than that in styrene. From mid-to-late August to now, the prices of GPPS, EPS and ABS have increased by 9%, 8% and 6% respectively.
Better-than-expected demand improved supply-demand pattern.
In 2022, newly added styrene units have been put into operation in succession, and the supply is expected to increase constantly. While in mid-to-late August, the supply of Chinese-made styrene showed a downward trend, because some styrene units were shut down due to economic woes and some producers reduced operating rates due to unit failures.
In terms of demand, due to the poor performance of major terminal industries for most of this year, market players previously expected that the demand side would not underpin the styrene price in September and October this year. However, entering August, most end enterprises increased procurement when the styrene price was low, restocking for the production in September and October. At the same time, the operating rate of PS, EPS and ABS producers rose gradually, increasing the demand for styrene consecutively.
Styrene supply is predicted to increase in October.
According to the SCI, the operating rate of styrene downstream enterprises in October will not change much compared with that in September. The total demand for styrene may remain stable and even increase, because some end enterprises have said that the production may grow M-O-M.
However, the supply of styrene is also expected to rise further. For one thing, the supply of Chinese-made styrene will increase with the restart of maintenance units and the improvement in the overall operating rates. For another thing, the imports of styrene will also climb. On the whole, the total supply of styrene in October may rise by 10% M-O-M.
In October, the supply and demand spread of styrene is expected to expand, which will weaken the support for styrene price rise. At the same time, market players also need to pay attention to the cost variables, especially the fluctuations of crude oil prices.
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