Styrene Price Fell More Than Rise in Q4, 2021
In the fourth quarter of 2021, China’s styrene price first fell from highs and then rebounded. As of November 29, 2021, the prevailing price of styrene in East China read RMB 7,700/mt, down RMB 2,350/mt from RMB 10,050/mt on October 11. After that, styrene price began to bounce, and increased by RMB 850/mt to RMB 8,550/mt by December 31, a rise of 11.04%.
The decline in styrene prices over October-November was mainly affected by the macro economy environment and weak expectations, while the supply-demand fundamental of styrene was not pessimistic.
Styrene prices began to rebound in December. From the chart above we can see that while styrene prices rising, the price of crude oil was still in a sharp decline, and benzene price just stopped falling, indicating that the gain in styrene price was driven by its own supply-demand fundamentals.
The upgrading of several reservoirs made it inconvenient to pick up the goods, resulting in the tight supply of spot market, and the price was naturally expensive. Later, with the appearance of the mutated virus, the futures funds left the market based on the risk aversion brought by the virus to the market, the short strength weakened and the price continued to seesaw until late December. From December 23, 2021, styrene prices began to rise again favored by multiple factors. The international crude oil price advanced sharply, and the units at Exxon in U.S. suffered failure, driving up benzene prices. Moreover, the inventory at main ports fell for two consecutive weeks with the open of the arbitrage window between North China and East China, as well as the rise in export volume. Therefore, the spot supply was tight for delivery at the end of December.
In addition to macro factors, there were also weak expectations weighing on the market. The commissioning of new units at Yantai Wanhua Chemical, Ningbo ZRCC LyondellBasell New Material and Shandong Lihuayi Group (with total capacity of 2,030kt/a) together with faded demand in winter added supply pressure on the market. The expectation of inventory increment was also a main reason for the price decline. However, from the final data, the supply and demand ratio improved in the fourth quarter compared with last quarter, and the overall inventory was also on a trend of de-stocking. So what is the reason for this change in fundamentals?
The demand in the fourth quarter is unexpectedly impressive.
The total supply in Q4 decreased by 1.79% Q-O-Q. The styrene output in Q4, 2021 totaled 3,081.2kt, down 4.62% Q-O-Q. The import volume was estimated at 478.1kt, up 21.47% Q-O-Q.
The total supply in Q4 gained by 4.35% Q-O-Q. The total demand volume in the seven downstream industries read 2,880kt, up 4.48% Q-O-Q. The export volume in Q4 was 10kt, down 13.08% Q-O-Q.
For January 2022, the styrene market remained volatile as of January 14. The constantly rising crude oil price strengthened the rising momentum of benzene against the background of increased demand and declining inventory, and also boosted the styrene market neglecting the rising inventory.
In the later stage, with the new units coming on stream and downstream users leaving the market, the demand side will weaken further near the Spring Festival. Moreover, the profits of downstream PS and EPS units will be further contracted due to higher costs.
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