Weak demand will limit styrene gains

After the Spring Festival, styrene futures went up first, then down, and then up again. The first wave of rise was caused by the cold wave in the United States, which led to the off-line production capacity of more than 4 million tons, and the unexpected shutdown of plants in Europe and Japan. The subsequent fall could be said to be a repair of the reactivation of these units; The current increase is due to the global installation spring overhaul, styrene inventory continued to decline. Looking forward to the future, the upside of styrene futures is limited by sluggish demand, and will also face a significant expansion of capacity this year, which may be the last strength of styrene.

Downstream with weak rise

The main downstream products of styrene are expanded polystyrene (EPS), polystyrene (PS), ABS resin, synthetic rubber (SBR, SBL, SBS, etc.), unsaturated polyester resin (UPR) and styrene copolymers Things (such as SBC). In 2020, EPS will account for 27% of the downstream demand for styrene, PS will account for 22%, and ABS will account for 21%. Among the three downstream sectors, 68% of ABS is used for home appliances and electronic consumption, 50% of PS is used for electronic appliances, and 55% of EPS is used for home appliance packaging and daily necessities. The development of home appliances and electronics has a greater impact on the downstream of styrene.

In 2020, thanks to the “home economy” brought about by the epidemic, the sales of cooking and personal care small home appliances will increase sharply. At the same time, the demand for household storage and refrigeration will increase significantly, leading to a sharp increase in the export of refrigerators; sales data of color TVs and air conditioners are also very eye-catching . According to the latest data released by the China Household Electrical Appliances Association, in 2020, China’s household electrical appliance industry’s cumulative export value was US$83.7 billion, an increase of 18% year-on-year, and the export value hit a record high, and the growth rate was the highest in the past 10 years. In the first half of 2021, the good export trend of home appliances will continue to be maintained. In the second half of the year, as the overseas epidemic eases, some countries cancel fiscal subsidies to residents, consumer spending will decrease, and the growth rate of home appliance exports may decline. At the same time, we must also see that home appliances are not fast-moving consumer goods, and the service life of large and small home appliances ranges from 3 to 10 years. In 2021, it is very unlikely that home appliance exports will exceed expectations.

It is the changes in terminal demand trends that have triggered the ability to increase prices directly downstream of styrene. The price of styrene went to the warehouse this time, and the downstream PS and EPS were obviously not rising. On April 23, the loss per ton of PS was as high as 1,020 yuan. This is the largest loss we have tracked since 2018. EPS also began to lose money in late April. The direct consequence of downstream losses is the decline in operating rate. The operating rate of PS at the beginning of April was 72%, and the operating rate at the end of April fell to 67%. In the same period, the operating rate of EPS fell from 63.5% to 55%. Without the downstream follow-up, the rise of styrene is difficult to last.

Port inventory is low

After reading the demand for styrene, let’s take a look at the situation on the supply side. In February, several installations in Europe and Japan were unexpectedly shut down, and at the same time, the cold current in the United States affected almost all US styrene production capacity. February to May is the seasonal maintenance period in Northeast Asia and the Middle East, and the global styrene is in a destocking pattern. When European and American supplies were most in short supply, Asian styrene dollar prices were once discounted to Europe by 1,200 US dollars/ton and the United States by 800 US dollars/ton. This structure is that China, as a net importer of styrene, has gradually started to export styrene overseas. It is estimated that my country will export 160,000 tons of styrene from March to May, of which 40,000 tons have already been exported in March. my country’s imports have decreased and exports have increased. my country itself is also at a seasonal peak in overhaul. Production has fallen. The port inventory of styrene has dropped to a six-year low, and the arrivals at the docks in the next 2-4 weeks will remain low.

On the whole, the tight supply of styrene may still become a price support. From April to May, styrene is still in the maintenance season. After May, the maintenance capacity will gradually resume production. At the same time, Huatai Shengfu’s 450,000 tons capacity will be put into operation in May. At that time, styrene will usher in a weak resonance of supply and demand. At this stage, low inventories are subject to sluggish downstream demand, and price upward resistance is heavy. Styrene is more likely to absorb the gains of low inventories in a high-level oscillation manner. Around the third quarter of this year, there will be 450,000 tons of Tianjin Bohua, 600,000 tons of Gulei Petrochemical, 400,000 tons of Maoming Petrochemical, and 720,000 tons of Lihuayi, totaling 2.17 million tons, accounting for 13.47 million tons of my country’s current total production capacity. The ratio is 16%. In the whole year of 2021, my country’s expansion of styrene production will account for 33% of the meter demand in 2020. In the second half of the year, styrene will again test the lower edge of non-integrated costs.