In early July, the styrene and its industrial chain ended their nearly three-month downward trend and quickly rebounded and rose against the trend. The market continued to rise in August, with raw material prices reaching their highest level since early October 2022. However, the growth rate of downstream products is far lower than that of the raw material end, constrained by rising costs and declining supply, and the market’s upward trend is limited.
Rising costs trigger setbacks in industry chain profitability
The strong increase in raw material prices has led to a gradual transmission of cost pressure, further reducing the profitability of styrene and its downstream industry chain. The pressure of losses in the styrene and PS industries has increased, and the EPS and ABS industries have shifted from profit to loss. Monitoring data shows that currently, in the overall industry chain, except for the EPS industry, which fluctuates both above and below the breakeven point, the pressure of product losses in other industries is still high. With the gradual introduction of new production capacity, the supply-demand contradiction in the PS and ABS industries has become prominent. In August, ABS supply was sufficient, and the pressure on industry losses has increased; The decrease in PS supply has led to a slight reduction in industry loss pressure in August.
The combination of insufficient orders and loss pressure has led to a decrease in some downstream loads
Data shows that compared to the same period in 2022, the average operating load of the EPS and PS industries has shown a downward trend. Affected by the pressure of industry losses, the enthusiasm of production enterprises to start operations has weakened. In order to avoid the risk of losses, they have reduced their operating load one after another; Planned and unplanned maintenance are more concentrated from June to August. As maintenance companies resume production, the operating load of the styrene industry slightly increased in August; In terms of the ABS industry, the end of seasonal maintenance and fierce brand competition have led to an upward trend in the industry’s operating rate in August.
Looking ahead: High costs in the medium term, market prices under pressure, and industry chain profitability still limited
In the medium term, international crude oil continues to fluctuate, and the supply of pure benzene is tight, and it is expected to maintain strong volatility. The styrene market for the three major S raw materials may maintain high volatility. The supply side of the three major S industries is under pressure due to the launch of new projects, but the growth rate of demand is relatively slow, resulting in limited price increases and insufficient profitability.
In terms of cost, the prices of crude oil and pure benzene may be affected by the strengthening of the US dollar, and may face downward pressure in the short term. But in the long run, prices may remain volatile and strong. Production capacity is gradually increasing, and the supply of pure benzene may be tight, thereby driving market prices to maintain an increase. However, insufficient terminal demand may limit market price increases. In the short term, styrene prices may fluctuate at high levels, but as maintenance companies gradually resume production, the market may face expectations of a pullback.