Styrene continues its strength on improving supply-demand structure

China domestic styrene prices posted aggressive increase since the beginning of July with East China styrene price up by nearly 900yuan/mt to 8,080yuan/mt on July 18. CFR China styrene increased by about $100/mt to $970/mt.

The rise was initially triggered by anticipation of slower styrene output recovery, as producers were expected to lower styrene output in order to get more ethylbenzene for gasoline blending after China imposing consumption tax on mixed xylene starting from July 1. Meanwhile, the restart of Wanhua was later than expected and the restart of Shuangliang Leasty was postponed to the end of July.

Then the increase slowed down, but only for about 2 days, before the speculations renewed again with the shutdown of Lihuayi in Shandong. The shutdown only lasted for a coupled of days but the speculations continued, especially after market participants seeing opportunities to export styrene cargoes to Europe after the surge in NWE styrene price.

The NWE styrene price surged by $89/mt to $1,189/mt on July 17 due to unexpected unit shutdown, resulting in opened arbitrage window from China to NWE market. Therefore, the expectation for the supply-demand structure in August turned from inventory buildup to tight balance.

In short term, styrene prices are likely to keep firm but fluctuating on low port inventory and speculations on possible increasing exports. However, in medium to long term, supply is expected to gradually recover with the upcoming unit restarts and downstream buyers are inactive to chase up.