Since late February, the focus of styrene futures prices has been continuously shifting downward, constantly setting new stage lows. Yesterday, the styrene futures price reached a new low in a year and a half.

Fangzheng Zhongqi Futures analyst Feng Xiaofen told the Futures Daily reporter that from late February to early March, affected by fluctuations in crude oil prices, chemical products experienced a widespread decline, with pure oil-based chemical products undergoing significant adjustments. "Since mid-March, the price trend of styrene has been noticeably weaker than that of other chemical products, not because of its own fundamentals being weak, but more due to the drag from the raw material side," she said.

"The main pressure on the styrene market currently comes from the weak adjustment of raw material prices." Feng Xiaofen stated that the continuous decline in pure benzene has a drag effect on styrene, and with the supply and demand of pure benzene being relatively loose, prices are expected to be difficult to rise."

In this regard, Dai Yifan, head of the petrochemical sector at Nanhua Futures, also stated that the recent trend of the styrene main contract has diverged from that of crude oil, as its main driving logic remains the weak performance of the upstream core material, benzene, leading to a further decline in the price of styrene.

In terms of benzene, the market's imports have exceeded expectations, and the supply-demand mismatch in the European and American benzene markets is unlikely to be reversed in the short term. The import volume of benzene may remain high in the coming months.

In addition, while the price of benzene has fallen, poor demand from downstream terminals and accumulated inventory have led to no significant improvement in downstream profits. "In April, the benzene industry chain enters the maintenance season, facing a situation of reduced supply and demand domestically. With imports remaining high, benzene supply continues to be ample," said Dai Yifan.

According to An Ran, a senior analyst of energy and chemicals at Huazheng Futures, the recent continuous decline in the price center of styrene reflects a sharp contradiction between supply and demand in the chemical industry after a significant reduction in costs.

"In recent years, the rapid increase in the production of styrene and its downstream products has led to a significant supply-demand mismatch in the styrene industry chain." According to Anran, the average capacity growth rate in China from 2020 to 2023 exceeded 20%. Although new capacity additions will slow down in 2024, coupled with the exit of related capacities in Singapore and Japan, the supply pressure will ease. However, downstream demand is also becoming increasingly saturated, and the growth rate of exports has slowed due to the impact of the international situation, leading to ongoing losses in the mid- and downstream segments of the industry chain.

In her view, factors such as high downstream finished product inventory, continuous decline in 3S operating rates, and insufficient new order transaction volume are continuously putting pressure on the market. "Currently, the profit margins for ABS and EPS companies are narrowing, while the loss margins for PS companies are increasing, and there are no highlights on the demand side," An Ran said.

The reporter observed that as futures prices fell, the spot performance of styrene also weakened, but recently the basis for styrene has strengthened slightly.

"In April, the centralized equipment maintenance is expected to improve the supply and demand marginally, supporting stronger cash flow for the facilities and a slight correction in the basis," said Feng Xiaofen.

"Currently, from the perspective of styrene's own supply and demand, there is an expectation for further improvement in the future." Feng Xiaofen stated that, based on the maintenance plans for the facilities, multiple units are scheduled for maintenance in late March and early April. As these maintenance plans are implemented, there is a clear expectation of a contraction in supply, and at that time, styrene will enter a destocking phase.

The concentrated maintenance of styrene has a negative impact on pure benzene, combined with the continuous influx of overseas pure benzene supplies, which has significantly affected the domestic market. The spot market has ample supply of pure benzene, leading to a sharp decline in prices, which in turn has dragged down styrene prices.

In Feng Xiaofen's view, the key factor that will drive the future trend of styrene futures is still the price of raw material benzene.

"Due to the peak period of production in recent years for most chemical products, the increase in new capacity has led to squeezed industry profits, with prices largely determined by costs." Feng Xiaofen stated that if the price of pure benzene continues to weaken, styrene is likely to follow suit with a downward adjustment.

In Dai Yifan's view, the key to improving the domestic benzene market structure lies in the stabilization of overseas market prices. "Market news indicates that a 330,000-ton dismutation unit in the United States is offline, and there are also plans to reduce production at benzene units in South Korea. However, judging from the continuous decline in overseas benzene prices over the past couple of days, the time for the overseas benzene market structure to improve has not yet arrived," he said.

However, Dai Yifan believes that the futures price of styrene is unlikely to drop significantly. "Currently, the valuation of pure benzene has been compressed to historical lows, and the futures price of styrene is also within a relatively reasonable range. There may be emotional fluctuations in the future, but the downside space is limited. Further declines in the futures market may have to wait until the peak demand season for styrene’s downstream products is proven to be false," he stated.