Styrene Shandong-East China Price Spread Analysis
After the Spring Festival, styrene prices in Shandong and East China fell in tandem. However, Shandong’s market showed relative resilience due to benzene support and stronger supply-demand fundamentals, ending its nearly year-long discount to East China. By March 25, the monthly average price spread narrowed to RMB 25/mt. Shandong’s supply-demand improvement may lag behind East China later, potentially weakening its price premium.
From February 5 to March 24, Shandong styrene prices dropped RMB 570/mt from their February peak, less steep than East China’s RMB 760/mt decline. First, February’s benzene price inversion bolstered Shandong’s cost support. Second, Shandong’s supply-demand balance tightened as local producers actively supported prices, while East China faced weakening fundamentals.
Styrene prices were supported by strong cost and fundamentals in Feb.
In February, Shandong benzene prices averaged RMB 7,837.63/mt, up 4.58% MoM, outperforming East China’s RMB 7,666.84/mt, up 2.75% MoM. Shandong’s spot-driven market saw strong post-holiday demand recovery amid tightening supply from refinery maintenance. Meanwhile, East China grappled with port inventory builds and high import expectations, capping price upside.
On styrene fundamentals, Shandong’s smaller price decrement reflected superior supply-demand dynamics. February output fell 12.49% MoM to 233.4kt in Shandong, steeper than East China’s 10.61% drop to 614.1kt. Downstream consumption in Shandong dipped 8.71% MoM to 90.9 kt, less severe than East China’s 12.20% to 551.4kt.
Shandong plants prop up prices, driving Shandong premiums over East China in Mar.
In March, benzene prices in Shandong and East China declined in tandem, with Shandong shifting to a discount against East China by mid-March, turning local market support into a drag. However, Shandong Lihuayi Group’s styrene unit prepared for catalyst replacement, while its downstream PS and ABS units continued running without synchronized maintenance. Producers actively built inventory to ensure downstream stability during the styrene unit shutdown. Additionally, startups at Shandong Lanhua Chemical and Shandong Yuhuang Chemical Group’s PS units in mid-March boosted spot styrene demand, prompting collective price support from Shandong plants.
In East China, styrene port inventory accumulated from February to early March. Later, Shenghong Petrochemical Group’s unit took a shutdown and Zhejiang Petroleum & Chemical’s 120kt/a EB dehydrogenation unit reduced operating rates due to heat exchanger issues. Therefore, the inventory declined. With rising inventory indexes at key downstream sectors amplifying short-term drawdown pressure, concerns persisted over the future destocking pace. Weak benzene market sentiment further weighed on the styrene market, deepening East China price declines. By March 24, the monthly average Shandong-East China spread stood at RMB 25/mt. Limited East China low-priced cargoes flowed into southwestern Shandong, though the arbitrage window mostly stayed closed.
April Shandong supply-demand inflection may lag East China
Short-term benzene bearishness on the styrene market may persist, but East China may gain earlier price support from anticipated drawdowns. Shandong faces supply-demand pressure ahead of Shandong Lihuayi Group’s maintenance, limiting notable spread widening. Close monitoring is needed on how Shandong’s maintenance reshapes regional fundamentals.
Firstly, the benzene market is expected to continue exerting a bearish influence on the styrene market in both regions in tandem. The supply-demand pressure faced by the benzene industry is unlikely to ease in the short term. Due to the anticipated weak demand in the northern region, prices may remain lower than those in East China. However, with the expected high volume of imports into East China, the price differential between the two regions is unlikely to widen significantly in the short term, and the impact on the benzene markets in both regions is also unlikely to differ markedly.
Secondly, there is an expectation of continued destocking at East China’s main port, providing strong support for prices, while the market in Shandong may be weaker than that in East China before Shandong Lihuayi Group’s unit undergoes maintenance. In East China, on the one hand, there are maintenance plans for Zhejiang Petroleum & Chemical and BASF-YPC’s unit. The estimated loss of production may be around 40kt. On the other hand, Wanhua Chemical Group and Hengli Petrochemical also have maintenance plans in April, which may reduce shipments to East China. Additionally, the planned startup of the Shandong Yulong Petrochemical’s ABS unit in April may also reduce shipments to East China, with an estimated total impact of around 25kt. Although downstream factories face inventory pressure, they may maintain high operating rates driven by profit motives, and negative feedback is not apparent in the short term. Therefore, East China’s main port is expected to experience consecutive destocking in April, with port inventory potentially dropping to 80-100kt by the end of April, which is at a low level compared to the same period in previous years, providing strong support for prices in the East China market. In Shandong, the current price differential between styrene and benzene is around RMB 1,300/mt, prompting factories to maintain high operating rates driven by profit motives. Until Shandong Lihuayi Group undergoes maintenance, supply in the Shandong market is unlikely to contract. However, compared to East China, downstream feedstock procurement in Shandong relies more on spot purchases and less on contracts, so downstream rigid demand may still support the demand for styrene in Shandong. In summary, the timing of the Shandong Lihuayi Group’s maintenance will be a key variable affecting the Shandong market.
In conclusion, the supply-demand structure in East China is expected to improve earlier than in Shandong in April, making it difficult for Shandong prices to continue trading at a premium to East China. Before and after the Shandong Lihuayi Group’s maintenance, Shandong factories may still have the intention to maintain prices, and there will be limited arbitrage opportunities between the two regions, further reducing cargo flows.
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