Styrene: data sorting in the first half of the year

1、 Styrene Market

In the first half of 2022, the styrene market rebounded strongly, hitting a new high in recent three years, and retreated to the end of June with the high price bearing. At the high level, the profit distribution of the industrial chain is unbalanced, and the downstream is eroded by high cost pressure. Although the negative profit of styrene has improved, it is still on the marginal line of cash flow profit and loss. In the first half of the year, the market was at a high level, which was mostly driven by costs and fluctuated at a high level under the guidance of the cost of crude oil and pure benzene.

Looking back on the first half of 2022, a wave of cost driven upward trend, international crude oil rose sharply, and crude oil and refined oil rose collectively in the first half of 2022. The derivatives rose synchronously. As the crude oil market entered the peak season in June, the crude oil price rose, the demand for refined oil was strong, and the aromatics market also rose sharply. The price of pure benzene hit a high in recent 8 years. Under the background of the continuous upward movement of the cost center, the styrene market was driven to rise, hitting a high in recent three years in early June, and then the high range fluctuated to the end of June.

In the first quarter, the market became stronger in the shock. Affected by the Spring Festival, the market was mild, and the demand rebounded rapidly after the Spring Festival. In addition, the overseas crude oil and US dollar prices rose sharply, and the market rose in waves. From March to may, the market fluctuated in the range, but it was difficult to decline, mainly due to the impact of the epidemic. The market was unstable, supply and demand were weak, and the disk was volatile. The weak demand under the epidemic restrained the drive of high oil prices. However, the oil price has driven the market. From May to June, the market fluctuated and rose again. After crude oil surged, domestic futures rebounded, and the production of new capacity was delayed, styrene prices followed crude oil and pure benzene higher.

It is analyzed that the strength of the pure benzene styrene industrial chain in the first half of the year is more reflected by the rise of crude oil and refined oil on downstream petrochemical products. Due to the tight supply of crude oil, due to the outbreak of the war between Russia and Ukraine, the international oil price soared, the output of Russian crude oil fell, and the potential for OPEC to increase production beyond expectations was limited. The insufficient willingness of shale oil manufacturers to invest and the shortage of labor force restrict the growth rate of crude oil production in the United States. In terms of demand, the return of Chinese demand led to a significant pick-up in crude oil demand in the third quarter on a month on month basis. The demand in the United States was stable in the third quarter, and crude oil is expected to hit its highest level in the peak summer demand season. And the average price of Brent crude oil in the third and fourth quarters is expected to be $130 / barrel and $120 / barrel. The high cost laid the foundation for petrochemical costs, the high price of pure benzene was difficult to fall, and styrene enterprises rose passively under the pressure of high cost. In terms of demand, in the first half of the year, affected by the epidemic, some terminal demand was suppressed, but the demand still showed some resilience. After the Spring Festival, the demand increased rapidly. However, under the control measures of severe epidemic in East China and Shanghai at the end of March and April, the growth rate of terminal demand was affected, and the growth of logistics, transportation and consumption declined. Inventory reduction has also been repeated. However, in the late stage of the epidemic, after the epidemic was alleviated, there was some room for repair at the terminal, the demand improved, the dock inventory continued to decline, and the overseas price was at a high premium with the domestic price, and the FOB export was good. Combined with the strong high rise of crude oil in early June, both pure benzene and styrene hit new highs.

It is still possible to improve the supply and demand pattern for the improvement of consumer demand in the third quarter. On the one hand, as the third quarter is about to enter the peak season, the demand for household appliances and automobiles is gradually improving, domestic consumption is stable, and the improvement expectation is stronger than that in the second quarter. On the other hand, the pattern of high oil prices may continue. Although the cost support has been weakened, the price support will still exist. Secondly, depolarization continued in the third quarter. With good export and domestic demand, depolarization can be expected. In addition, the domestic new production capacity is focused on, which may affect the operating rate of domestic devices. The domestic production capacity and output increased month on month, and Maoming Petrochemical phase II and Tianjin Bohai Chemical were successfully put into operation. It is expected that the supply and demand of styrene is the key in the later stage. In the short term, it is disturbed by oil prices, and the market is mainly high-level fluctuations, and the long-term supply and demand pressure is still large.

2、 Styrene external market trend:

In terms of external quotation, in the first half of this year, the intercontinental market fluctuated upward, and frequent accidents of overseas devices triggered a sharp rise in the US dollar market, boosting the domestic spot market to a new high this year. The source of imported goods decreased sharply, and the port inventory continued to be destocked, which formed a positive support for the price and pushed up the market quotation. At the end of February, the Asian dollar market hit a high point of the year to $1347 / ton FOB South Korea, the European market hit $2489.25 / ton FOB Rotterdam in the first ten days of last month, and the United States hit a record high of $1875 / ton fob in the Gulf of the United States. Europe, the United States and Asia formed a huge reverse arbitrage window, which was also the main reason for the surge in exports from March to May this year. The sources of goods in the Asian and Chinese markets flowed overseas, and the domestic port inventory fell sharply due to the positive support. However, with the gradual resumption of operation of overseas devices, the supply tension in Europe has eased, the supply in the United States has increased, the European and American markets have gradually returned to fundamentals, and the price has fallen all the way. By the end of June, the FOB Rotterdam price has fallen by 54% from its peak, and the U.S. market has also fallen sharply.

3、 Trend of downstream products:

In the first half of the year, the main downstream of styrene followed the trend of raw materials, but it was relatively weak compared with the rise of raw materials. In the first quarter, affected by the Spring Festival, the market was relatively stable. After the Spring Festival, the main downstream industries recovered rapidly, the operating rate increased significantly, and the profits of enterprises were relatively healthy. However, in the second quarter, with the increasing pressure of high-cost raw materials, the epidemic reduced terminal consumption, especially in May, which had a serious impact on logistics and consumption in East China. The operating rate of the terminal industry fell sharply, and the terminal industry was under pressure. However, the upstream raw material styrene and other products rose sharply. Under the pressure of upstream and downstream, the operating rate and profit of the terminal PS, EPS and ABS industries fell, and individual brands suffered losses. In the past, the industry profit of ABS with high profit margin was also on the marginal line. With the high temperature in the north and the constraints on the terminal demand in the flood season in the south, the transmission of costs was not smooth, and it was difficult to follow the strength of raw materials. Echoing the deviation from the price trend of the industrial chain, the profits of the industrial chain have shifted. In the first half of the year, with the rise of energy, the profits of styrene industry chain shifted to the upstream, and the profits of downstream industries were damaged. Styrene and downstream trends are differentiated. The weak performance of the downstream demand side is expected to have negative feedback on the upstream. However, the crude oil is high, and it is expected that the cost pressure in the second half of the year will still disturb the downstream end demand.