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Insight | Time: May 13 2022 10:58AM  Editor:Amber
How will styrene downstream market perform?
 
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Returning from the Labor Day holiday, the overall inventory pressure after the holiday is relatively limited due to the replenishment of low-priced goods before the holiday. In addition, the styrene market continues to heat up, and the styrene downstream market is relatively strong in the early stage. However, with the rapid decline of crude oil, styrene market moves down, and the downstream products drops due to the lack of support. Judging from the situation of each product, the pressure supply and demand of ABS has gradually increased, and the market has continued to fall. The operating rate of PS is not high, but the pressure of supply and demand has not diminished. Moreover, due to its poor profits, the market is mostly affected by the rise and fall of styrene, and follows the trend of styrene market as a whole. The epidemic in some areas affects logistics and transportation, and the demand of end-users is relatively limited. Let's take a look at the actual changes in the styrene downstream products and the subsequent development.

 

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1. The market has fallen back, and the benefit has continued to shrink.


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From the perspective of the overall cash flow of the styrene industry chain, styrene continues to be under high cost pressure. In addition, after the sharp rise in oil prices in 2022, although the market shows a generally upward trend, the cash flow loss situation continues to maintain. As for the downstream, under the pressure of the styrene market, the supply and demand of PS and EPS is weak as a whole and the cash flow maintains a downward trend, especially PS, the supply pressure brought by rapid capacity expansion further suppresses the market and reduces the price spread between styrene and PS. In 2022, the cash flow has been near the break-even line for a long time, and some time there has been obvious losses. The surplus of EPS maintains, and the market will follow the trend of styrene while maintaining a certain price spread. However, due to the long-term impact of the epidemic, logistics and transportation, and sluggish demand, it is difficult to have a better market performance as a whole. Moreover, the high-profit of ABS has also changed significantly in the past few years. Since the fourth quarter of 2021, with the decline of the market price, the cash flow of ABS has decreased significantly. In 2022, the cost pressure continues to increase, and the ABS market continue to decline, resulting in a further narrowing of the price spread. The profit of enterprises has accelerated to decline, and the current poor market situation is maintained. The high cost pressure brought by oil prices has not changed, and the ABS profit continues to decline.

 

2. Supply and demand are sluggish, and it is difficult for the market to improve

 

Judging from the operating rate of styrene downstream products, in April, many places in China has been affected by the epidemic for a long time, the transportation of raw materials and finished products has been blocked. The production reduction and plant turnaround has been relatively concentrated under the condition of temporary adjustment and maintenance plan, and the operating rate of styrene downstream plants is relatively low as a whole.


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Apr Styrene demand loss y-o-y (kt) Supply loss y-o-y (kt) Styrene demand loss m-o-m (kt) Supply loss m-o-m (kt)
EPS 30 32.2 2.5 2.7
PS 28.3 28.9 24.7 25.2
ABS 31.5 52.7 31.9 53.1


Market forecast:

Judging from the situation in May, the overall operating rate of styrene downstream products has increased. In the short term, due to the relatively slow recovery of demand in the early stage, the pressure of supply and demand is still maintained. Driven by the rising styrene, the upward space of PS and EPS is limited, and actual profits of ABS has been affected by the poor market. However, under the situation that the pandemic tends to improve, the cost pressure brought by oil prices and maintained inflation expectation, the downward potential of styrene downstream products is limited, but the price spread still exist. The operating rates of PS and EPS is adjusted according to the actual supply and demand situation. The operating rates of ABS increases significantly in May, the supply increases and the contradiction between supply and demand is still maintained. Although the downward space is expected to be limited, the profits may further narrow, and the market trend depends on the recovery of demand.

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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