Styrene Industry Chain Margins Transmitting Downward
Before Q4, 2019, styrene and ABS enjoyed high margins in the styrene industry chain. The growth of ABS supply has been lower than that of the demand, which contributed to the high margins. In the recent five years, the average demand growth rate stood at 8.84%, while the capacity growth rate was only 2.71%. Similarly, long-term short supply resulted in high margins in the styrene sector. From H2, 2016 to H1, 2017, styrene margins narrowed, as 13.05% of capacity growth in 2016 was fully released in H1, 2017. Rapid capacity expansion squeezed styrene margins, while there still existed demand gap. With the demand steadily rising, the supply-demand structure improved, and the margin went up again in 2018 and 2019.
PS and EPS margins mainly followed cost moves, the margins of benzene, a by-product of naphtha cracker, almost had no reference value.
Continual and high styrene margins have attracted new entrants. In addition, the refining-chemical integration development helps lift the styrene capacity. After styrene futures was listed on DCE in September 2019, the expected capacity expansion started to affect the prices and further impacted the margins. From end-2019 to early 2020, Hengli Petrochemical and ZPC (Zhejiang Petroleum & Chemical) came on stream successively. Accordingly, styrene capacity went up. In 2020, the styrene industry chain margins transmitted downward. As of 2024, styrene capacity will continue to rise rapidly, and the demand growth will still exceed the supply growth. Therefore, the margins will further transmit downward.
