Styrene trading sentiment softens before new unit startups

As the styrene industry maintains reasonable profits, it has prompted styrene plants to commence operations as scheduled. Zhongtai Chemical plans to start its ethylbenzene unit in September, while Hongwei's 450kt/year PO/SM co-production unit is set to begin trial operations in early September. A total of 1.05 million tons of styrene production capacity is planned to reach full production after October, affecting long-term supply and putting pressure on the current basis trend and upward momentum. However, with port inventories remaining low, this provides support at the lower end. Consequently, the current market fluctuates around a volatile trend, with trading sentiment slightly subdued. Looking at the replenishment of short positions for late August paper trading, the overall atmosphere is particularly quiet.

ZPC's PO/SM unit is scheduled for maintenance in September, while Daxie and Huatai Shengfu plan maintenance in October. The current supply conditions do not support inventory accumulation. Even with two new units reaching full production in October, the maintenance and production increases will offset each other. Current port inventories are at historically low levels, and September port inventories are expected to remain low, driving speculative activity in the spot market.

In the lead-up to peak season demand, downstream EPS/PS/ABS industries are experiencing widening losses, with industrial operating rates remaining low. Demand continues to face pressure, while macroeconomic policies await market transmission. Major mainstream views on Double Eleven consumption expectations are generally weak. Under pessimistic forecasts, the three main downstream sectors have limited raw material and finished product stockpiling. Additionally, Tianjin Dingjin is expected to commence production in September, likely putting pressure on industry operating rates. However, overall peak season demand is expected to increase, although year-on-year growth may not meet previous expectations.

Sustained exports in the second half of the year are expected to face pressure. With European and American facilities recovering, regional temporary sourcing is constrained. Furthermore, Shell's styrene unit in Singapore is expected to resume operations around October. Despite South Korea's HTC and YNCC withdrawing anti-dumping investigations on Chinese styrene, China's styrene export market is unlikely to see significant volume increases, maintaining only around 20,000 tons of contracted exports. Additionally, Saudi Arabian styrene supply is expected to increase slightly.

In conclusion, even if new facilities begin full production in late September, styrene port inventories are unlikely to accumulate significantly in the short term (before November). However, long-term bearish pressure is gradually increasing, mainly due to the restart of facilities after maintenance and the commencement of new units after November. Increased supply will squeeze the styrene industry's cash flow, leading to adjustments in industry operating rates through port inventory transmission.