Styrene prices drop with more supply expected

The styrene market experienced a significant decline in late December, driven by increased supply following the restart of Zhejiang Petroleum & Chemical's unit. As the end-of-month delivery period approaches, spot price spreads have narrowed substantially, with cautious downstream buying and strong market hesitation. Port inventories surged noticeably, weighing on market sentiment. Downstream buyers adopted a wait-and-see approach, with procurement remaining cautious amid expectations of new production from restarted facilities. Spot basis prices declined further, while some downstream factories finalized 2025 sales contracts.

By Friday, spot styrene was priced at 8,430-8,450 yuan/mt. January were traded at 8,300-8,320 yuan/mt, and February futures at 8,320-8,340 yuan/mt.

The dollar-denominated styrene market remained subdued due to the Christmas and New Year holidays, resulting in limited discussions on paper and cargo transactions. Reduced operating rates and maintenance schedules across Asia in Q1 have tightened supply. However, European and U.S. prices remained relatively stable, maintaining a favorable import arbitrage to China. Imports are expected to increase.

Styrene monomer tank inventory in East China main ports increased by 18.5kt to 47kt on Dec 25 2024. Commercial inventory, known as the inventory held by traders, was 30.1kt.

Supply and Operations:

Zhejiang Petroleum & Chemical's 600kt/year PO/SM unit resumed operations at 60-70% rates after a one-month maintenance shutdown in late November, with its other three styrene units (1.8 million mt/year capacity) running at full capacity.

Tianjin Bohua's 450kt/year PO/SM unit reduced operating rates to 70-80% due to profit concerns, with plans to maintain these levels through January.

Downstream Market:

The normalization of ZPC's operations influenced ABS factory bidding activities, while EPS and PS demand remained sluggish. Factories operated on an as-needed basis, with slight recovery in processing margins. Pre-holiday restocking was cautious, and industry operating rates declined.

Outlook:

Falling spot prices and mounting pre-holiday inventory pressures have pushed styrene margins lower, prompting some producers to reduce operating rates. With previously idled units resuming operations and ample supply, the market remains well-stocked. Yulong Petrochemical's styrene facility is in the commissioning phase, adding further supply. Downstream procurement remains cautious, focusing on January cargo availability. Near-term market activity is expected to center on paper delivery, with rising port inventories leading to a significant decline in near-month basis prices. Short-term stabilization is anticipated, with attention on styrene unit maintenance and new capacity startups.