Styrene recedes after rising on unexpected unit shutdown

Affected by the continuous downturn in crude oil prices, the price of styrene stopped rising and began to fall back. However, an unexpected malfunction occurred at the Zhejiang Petroleum & Chemical Phase I styrene unit, driving up the styrene futures and the EB2402&03 spread. However, the sustainability of this rise remained moderate. Downstream demand for purchasing was weak. With earlier maintenance gradually resuming, supply recovery increased, putting pressure on the deterioration of the balance in January. 

Currently, the industry profit for styrene has returned to a comfortable range. The styrene and its upstream and downstream industries have basically achieved profitability. This led to the indefinite postponement of the planned December maintenance shutdown of the Lihuayi's 720kt/year styrene unit. The Haoyuan's 260kt/year styrene unit is nearing the time for catalyst replacement, but the exact timing has not been determined. Satellite Lianyungang Petrochemical's downstream PS is currently operating on two lines normally, increasing the probability of a short-term recovery of the styrene units. 

Since mid-December, there have been numerous maintenance restarts of styrene units, mainly involving large integrated units. Despite the sudden shutdown of ZPC's Phase I unit, its impact on the overall styrene supply was minimal. This caused the futures market to shake and fall back after a sudden surge. Additionally, subsequent arrivals at ports increased significantly, leading to a slight increase in port inventories. 

Styrene monomer tank inventory in East China main ports increased by 4.4kt week on week to 59kt on Dec 13, 2023. Commercial inventory, known as the inventory held by traders, was 38.6kt. 

With production cash flow currently acceptable and the slow pickup in orders during the upcoming Chinese New Year, producers are likely to engage in hedging short positions to lock in processing spreads for stable production. Currently, the EB2402&03 spread is still in negative territory, with asset management companies mostly in positive hedging, betting on the probability of unexpected shutdowns, shaping the counterpart layout for February.