Styrene market enters a cycle of losses and low inventories

Since the beginning of the month, styrene prices have slightly rebounded, maintaining a relatively high level for the year. However, the styrene industry continues to face expanding losses, affecting long-term supply, with strong downstream resistance to high prices, resulting in stagnant trading activity. The spot price difference between styrene and benzene has narrowed to 230yuan/mt, a historically low level.

The strong benzene market is squeezing cash flow in downstream industries, impacting the stability of styrene plant operations. Routine maintenance and increased rate cuts are affecting non-integrated units purchasing outsourced benzene, keeping the styrene industry operating below 70%. Zhongtai Chemical's 600kt/year styrene unit is scheduled for trial runs by the end of July, with production depending on profitability. Additionally, Ineos Styrolution's 430,000 mt/year styrene unit in Sarnia, Canada, which was temporarily shut down due to environmental issues, announced a permanent closure by June 2026. Increased production from Chinese styrene units is impacting North American styrene exports. The compressed styrene-benzene spread suggests that styrene supply growth will be much lower than expected, leading to reduced styrene inventories.

Styrene's profitability closely aligns with downstream ABS/PS sectors, particularly affecting cash flow. ZPC's 400kt/year ABS unit has reached full capacity, and its second phase 1.2 million mt/year ABS unit is set for phased commissioning in July. The joint production of styrene and downstream PS/ABS strains the industry's profitability. In contrast, independent EPS units have seen slower new capacity additions in recent years, maintaining positive cash flow and steadily increasing operating rates.

The pricing power within the styrene industry chain heavily depends on benzene. The entire chain, including styrene and downstream ABS/PS, is currently operating at a loss, caught in a cycle of declining profits and inventories. The situation is unlikely to improve until there is a reduction in medium and small capacities and slower new capacity additions, alleviating short to medium-term losses.