Styrene supply increases due to sluggish downstream demand

Recently, the main styrene futures contract rolled over, with generally moderate market fluctuations and a clear downward trend in unilateral movement. However, port inventories have maintained low levels overall, supporting a firm trend in the spot basis. The spot basis continues to remain above EB2408+300, while spot prices have fallen to 9,450 yuan/mt on Tuesday, the lowest since April. Downstream demand has been weak, with operating rates adjusting downward.

The styrene industry's profit is recovering rapidly, with current industry profits returning to the best levels of the year, and non-integrated plants increasing their operating rates. As the maintenance season gradually ends, operating rates have significantly improved. Mainstream facilities plan to complete restart operations in early August, leading to an increase in future port inventories.

Port arrivals have increased earlier than expected, although styrene facilities have not shown significant recovery. This is mainly due to the continued losses in downstream PS/ABS, with low operating rates affecting styrene consumption. Additionally, EPS is in its industry off-season, with some facilities extending their shutdown periods. With the spot price difference maintained around 300yuan/mt, reduced-rate and arbitrage trading has become the preferred method to maintain cash flow. This has led to slow styrene offtake from upstream factories, increasing styrene trade circulation at ports. Consequently, styrene arrivals at terminals have notably increased over the past two weeks.

The rebalancing of profits between styrene and its downstream products has driven premium operations in both upstream and downstream factories, returning supply and demand to their previous balance. As downstream industries reduce rates to capitalize on price differences, styrene's increased production drives corporate hedging operations. Port inventory accumulation will accelerate the realization of unilateral and basis trends, rapidly accumulating short positions in near-month futures and affecting the short-term return to styrene's estimated value.