Negative styrene-benzene spread emerges amid rising benzene prices

Since the beginning of 2024, benzene prices in East China have experienced a marked upward trend. Prices started at 7,415 yuan/mt on January 2 and escalated to 9,580 yuan/mt by June 18, reflecting a 29.2% increase. The surge became more pronounced in June, with a swift climb from 9,365 yuan/mt at the start of the month to 9,580 yuan/mt by mid-June.

This price hike has led to a significant narrowing of the styrene-benzene spread, which reached a historic low of -130 yuan/mt on June 18, following an initial dip to -100 yuan/mt on June 17. This contraction in the spread indicates the first recorded negative value since CCFGroup began its tracking.

The primary driver behind the recent benzene price surge is tight supply, exacerbated by limited port arrivals and low inventory levels. On June 19, benzene inventory at East China ports fell by 15kt to 16kt, substantially below the 2024 year-to-date average of 59.8kt. Additionally, the second quarter's extensive maintenance in petrochemical plants has further strained supply, coinciding with a rebound in operating rates at downstream benzene plants.

The rising benzene prices have also bolstered the cost support for styrene, leading to its price increase. However, the limited demand from end-users has impeded cost transmission, resulting in a narrowing-and eventually negative-price gap between styrene and benzene. This has increased the financial pressure on styrene, with a recorded cash flow of -765 yuan/mt as of June 17.

As the industry grapples with increasing losses and enters the off-season for end-user demand, styrene producers are adjusting by reducing operating rates. Upcoming plant maintenance at facilities like Haiwan Chemical, North Huajin, and Dagu Chemical in July and August, along with maintenance in downstream aniline and phenol units, are expected to ease the tight supply of benzene. Despite these adjustments, the risk of elevated benzene prices remains high in the short to medium term, with potential further price corrections anticipated.