Styrene plant shutdowns and reduced operating rates; port inventories set to decline

Since early March, styrene prices have continued falling, with port spot prices dropping below 8,000 yuan/mt. Pressured by high inventories and ongoing losses, major producers have increasingly opted for shutdowns or reduced operating rates. Additionally, significant declines in upstream benzene prices have lowered cost benchmarks, further depressing styrene values. Downstream sectors made intermittent purchases at lower prices, but overall demand remains moderate.

In April, more plant shutdowns and reduced operations are anticipated, particularly among integrated facilities and port-dependent plants, leading to fewer recent deliveries to ports. Prices offered by plants in northern and southern China currently exceed those in East China, indicating relatively tighter supplies at production plants compared to port inventories. Port inventories directly impact futures contracts, with the current spot premium approximately 60-75 yuan/mt above futures prices, primarily reflecting one-month storage and inspection costs.

With both benzene and styrene prices shifting downward, margins for non-integrated styrene and downstream plants are recovering rapidly. Profits across three major downstream sectors have improved significantly, boosting restocking demand.

This week, for the first time since the Chinese New Year, port dispatch volumes exceeded arrivals, signaling an inventory drawdown as downstream demand steadily recovers. Improved restocking activity at lower prices and reduced shipments reflect improving fundamentals, indicating port inventories may have peaked.

The recent broad decline in commodity futures largely stems from macroeconomic factors, including underwhelming policy stimulus from China's "Two Sessions" and persistently weak market confidence in end-user demand, reinforcing long-term pessimism. However, short-to-medium-term styrene fundamentals are improving, with inventory reduction expected from mid-March. This situation offers trading opportunities, such as buying monthly spreads on dips or widening benzene-styrene price differentials in the short term. Favorable supply-demand dynamics are likely to stabilize styrene prices following recent bearish pressures.