Increase in unexpected styrene maintenance amid deepening losses

After the Chinese New Year holiday, driven by the rise in benzene prices, the styrene market at ports remained firm, yet the trading sentiment was notably subdued. The slow resumption of downstream operations and significant de-stocking pressure at ports led to continuous fluctuations and declines in futures trading.

The styrene industry is experiencing historically tight cash flows, with not only non-integrated units mired in losses but even integrated units struggling to break even. Post-holiday, the production loss was around 600-800 yuan/mt. During the holiday, styrene factories maintained relatively stable production, but post-holiday operational uncertainty significantly increased.

Planned restarts of units were delayed, with Satellite Petrochemical and Anhui Jiaxi's resumptions pending, contingent on benzene procurement progress and profit margins. Additionally, unexpected shutdowns for maintenance increased, with Hainan Petrochemical closing its styrene unit to sell benzene. Haoyuan, Ningxia Baofeng, and Hengli Petrochemical planned maintenance at the end of February, with PO/SM co-production units reducing their rate to 70% operation. This resulted in a substantial decrease in domestic supply for February and March, leading to a tight supply-demand balance.

In Europe and US markets, styrene unit malfunctions led to significant price increases, creating arbitrage opportunities with the Asian market. However, actual transactions did not reach the export volumes of previous years. Despite an increase in long-term shutdowns in South Korea, imports from China decreased, with the mainstream transactions involving sources from Japan and Taiwa, China. Middle Eastern supplies compensated for temporary shortages in Turkey and Europe, leading to a continued decrease in China's import volume and difficulty in increasing exports in phases. Therefore, in the short term, the valuation of China's styrene will depend on domestic supply and demand dynamics, awaiting further resumption activities in downstream ABS/PS/EPS/UPR sectors. Based on past trends, overall styrene is expected to undergo a slow de-stocking phase in March and April, as factories seek a balance between profits and inventories.