Frequent Unit Changes Boost Styrene Prices to Keep Rising
Starting in early December, the styrene price reversed its downward pattern that began in mid-September, with prices largely climbing and only a brief period of correction. In the rising advancement, the supply side has played a vital role in consistently raising prices. On the morning of January 25, 2024, a transformer in an ethylene unit in East China caught fire, resulting in a power outage and affecting styrene capacity of 125kt/a. Changes in unit operation will affect prices, attracting industry attention once more.
Styrene prices experienced 2 waves of rise, with a growth rate of 12%.
From December 1 to January 24, the average price of styrene in the Jiangsu market increased from RMB 7,975/mt to RMB 8,905/mt, an increase of RMB 930/mt or 12%. The price showed a stepwise increase, with a slight fluctuation and weakening in January after the increase in December, and then a further increase.
The price increase in December was mostly caused by variances in supply and cost against forecasts. On the one hand, styrene supply dropped significantly below forecasts, while port inventory did not accumulate as anticipated due to weather. On the other side, as the price sank to a low point, the market’s willingness to bargain rose. Furthermore, downstream operating rates rose due to profit recovery, which contradicted the market’s low forecasts for demand. Finally, the inventory of feedstock benzene in the first half of December was smaller than predicted, and the initial unfavorable mood toward benzene softened.
In January, styrene prices first fell and then rose. The previous price drop was mainly due to the rapid growth in styrene inventory at East China main ports, combined with the weakening of crude oil prices. The price increase was mainly due to the rapid destocking of benzene and the optimistic expectation for the future benzene market.
Unit shutdowns increased, and unscheduled unit changes affected prices.
In 2023, styrene capacity continued to be in a high-speed expansion. By the end of the year, China’s styrene capacity reached 20.865 million mt/a, with a Y-O-Y growth rate of 19.81%. The industry has officially entered oversupply, with a capacity utilization rate of 74.96%, a decrease of 4.92 percentage points from 2022. In 2023, the profit of non-integrated styrene units was RMB -310/mt, up RMB 109/mt Y-O-Y but was still in a long-term loss. In this context, the long-term shutdown of styrene units has increased, and unplanned changes have become more frequent. The following table shows the long-term shutdown of units in the styrene industry, involving 2.465 million mt/a, accounting for 12% of the national total capacity. The styrene unit changes will have a clear impact on short-term market prices, but the impact on the market will depend on the capacity of the unit, downtime, and whether its products are available for sale.
On the morning of January 25, 2024, a transformer in an ethylene unit in East China caught fire, causing power loss to the power grid. The enterprise immediately initiated an emergency response. At present, the open flames on site have been extinguished, and this incident has caused the shutdown of the ethylene and downstream units. According to SCI, the enterprise has an ethylene capacity of 740kt/a, with downstream supporting units of 200kt/a of LDPE, 200kt/a of EVA, 125kt/a of styrene, 200kt/a of PS, 150kt/a of ethylene oxide, 320kt/a of MEG, and 30kt/a of acetaldehyde.
This enterprise’s PS is entirely for captive use, and it also purchases a portion of ethylene from the market. The styrene unit is currently offline, and the PS unit is experiencing reduced operating rates. However, market reactions suggest that the stoppage will be brief and have little influence on the styrene market.
China Styrene Units Turnarounds Schedule
The styrene market to stay relatively strong before the Spring Festival.
In the future, the styrene market will continue to be influenced by the feedstock benzene market, with supply and demand fundamentals determining the amplitude of price changes. The benzene market supply is expected to fall due to reduced imports and port inventory. The demand will remain mild. As a result, benzene market prices may remain high due to a tight supply and demand balance.
In terms of styrene market fundamentals, plants that were unexpectedly shut down are scheduled to resume operations in February, therefore styrene supply may increase next month. However, the Spring Festival holiday could significantly reduce demand. From March, port inventory is likely to fall, and the supply increase will be smaller than expected, suporting styrene prices. Overall, styrene prices are expected to stay relatively strong. If prices rise too much before the Spring Festival, there may be a pullback following the break. If there is a minor variation before the Spring Festival, there is a higher chance of a significant increase following the Spring Festival.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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