China's styrene exports increase, but unlikely to sustain

International chemical prices have increased on the back of rising crude oil prices. However, chemical prices in China were low, leaving the arbitrage window outside China opened. China has seen great increase in styrene exports as well.

Asian styrene prices remained the lowest among major markets since October 2021. Due to weakening margins, producers in South Korea and Japan have lowered operating rate. Output increment brought by the integrated unit startups could offset some production losses.

In January-February 2022, styrene imports of China totaled 247.8kt, touching the lowest level in the recent years. Owing to export demand, some imported cargoes were repurchased, leading to the apparent decrease in imports.

However, traders were cautious in participating in anticipations of recovering supply in the coming months. European/US styrene market was in backwardation structure. Currently, China's styrene could offset the supply gap overseas. However, the durability of China's styrene may hard to sustain.

Due to the outbreak of Covid-19 in China, styrene downstream was weaker than expected as EPS/PS plants shut units or cut operating rate. Some non-integrated styrene producers have also lowered output on cost pressure. April port inventory may be lower than expected due to the short term export. Even if the export could sustain, overall supply would likely to increase with the supply recovery of integrated producers.