Oversupply of styrene in China may depress prices in 2021

The global styrene supply surplus may escalate in 2021, because of the increase in production capacity in Asia, and in the case of the continuing epidemic, the uncertainty of demand recovery is obvious.

Although styrene prices in Asia soared in October due to tight supply, at the beginning of December, as producers in some regions restarted their installations, market supply increased and prices lost momentum for growth.

The increase in profit margins and the reopening of the arbitrage business at the end of 2020 have brought more supply to the Asian market.

Asia's styrene capacity has grown significantly

It is expected that China's styrene production capacity will expand by about 6.

A market participant said: "In the face of excessive competition, suppliers with a good cost structure will have an advantage.

At the same time, as a large number of factories will be shut down for maintenance in the first half of 2021, the production losses caused are expected to partially offset the supply growth and may support CFR China prices.

China's healthy demand for home appliances and automobiles is expected to continue into the first half of 2021.

According to market sources, India, Asia's second-largest importer of styrene, may be out of supply shortage in mid-January.

　　However, the Indian government ordered that styrene imports must undergo compulsory certification before May 2021, which may cause regulatory problems.
However, the deadline for styrene exporters to meet the necessary quality specifications set by the Bureau of Standards of India is expected to be extended.

　　The North American market depends on exports and the epidemic

　　In the United States, due to uncertain demand, market participants said that the raw material benzene will determine the fate of US styrene monomer spot in the first half of 2021, after the price reached an 18-month high in November.

　　The epidemic is expected to affect the operating rate of polystyrene producers.
In the case of changes in consumer behavior, polystyrene producers benefit from food service packaging.
Market participants said that continued spot export shipments will seriously affect US spot styrene prices.

　　Although some traders worry that China’s planned increase in styrene production may affect the global supply balance in the spring of 2021, the shutdown of factories in South Korea, Taiwan, Japan, and the Middle East may maintain Asia’s raw materials against the United States in the new year.
Demand.
In the long run, US traders believe that, with benzene prices remaining high and profit margins unsustainable, non-integrated Chinese producers will be most vulnerable to interest rate cuts or production suspensions on a global scale.

　　European contract buyers want bigger discounts in 2021

　　Under the dual impact of the impact of the new crown epidemic and the growth of production capacity in Asia, the European styrene monomer market in 2021 is also full of uncertainty.

　　Among them, the discount of contract styrene (the percentage of the styrene contract price determined by the industry on a monthly basis through negotiation in Europe) is still under discussion, and two different situations have emerged.
On the one hand, these discounts are expected to remain stable or even decline due to the meager profits of styrene producers in 2020.

　　However, a trader said that buyers have pushed for bigger discounts, and the opening price discount is as high as 25%, stimulated by the volatility of increased production and the desire to get rid of the contract price standard.
Another trader said that although the 25% discount is unrealistic, the discount for some settled contracts has increased by 1%-4%.

　　At the same time, market participants said that due to China's new production capacity in 2021, the European styrene market may be consolidated.
The new crown epidemic has severely disrupted the automotive industry, and European demand for new cars has declined as the region continues to blockade.

　　However, polystyrene will remain strong at the end of 2020 due to demand from the packaging industry.
And manufacturers are still optimistic about the future growth in demand in the construction sector.

Transfer from: China Plastics Online