In March, driven by cost increases stemming from US-Iran tensions and improved fundamental expectations, China's styrene prices experienced a significant rally followed by consolidation at high levels. Crude oil, ethylene, and benzene prices saw substantial increases, while exports unexpectedly rose to 80,000-90,000 metric tons. Market concerns over potential supply reductions led to multiple limit-up moves in futures trading. By March 31, the average price in the Jiangsu market reached 9,939 yuan per ton, up 29.27% month-on-month. Prices consolidated at high levels in early April. Looking ahead to mid-to-late April, the geopolitical situation in the Middle East remains the core variable. Strengthening fundamentals are expected to support prices, making declines difficult, though risks remain from potential oil price volatility during negotiation processes.
China's styrene prices rallied significantly in March before entering a period of high-level fluctuation. The primary drivers were rising costs and improving fundamental expectations. US-Iran tensions directly caused a sharp increase in crude oil prices. Subsequent geopolitical issues led to reduced global refinery supplies, which in turn drove ethylene prices higher, elevating styrene production costs. Meanwhile, supply reductions overseas exceeded those in China, leading to unexpectedly strong styrene export activity, with March exports estimated at 80,000-90,000 tons. Additionally, market concerns grew over potential supply reductions within China in April, sustaining bullish sentiment and supporting high price levels. Styrene futures hit limit-up several times during the month. By the March 31 close, Brent crude oil prices had increased 43.58% month-on-month, benzene rose 33.26%, ethylene jumped 57.18%, and the average closing price for styrene in the Jiangsu market was 9,939 yuan/ton, up 29.27%.
For April, cost drivers dominated by Middle East geopolitics remain the primary factor influencing styrene price movements. Meanwhile, strengthening fundamentals are likely to support prices, making significant declines difficult.
On the cost side, focus remains on negotiation progress, with oil prices still at risk of volatility. During the Qingming holiday, escalating tensions between the US and Iran kept crude oil prices fluctuating at high levels, maintaining a strong trend. On April 8, following active mediation by Pakistan, the US and Iran reached a provisional two-week ceasefire agreement, causing geopolitical risk premiums to quickly unwind. US crude prices fell from a high near $120 per barrel to approach $90, before rebounding slightly. Despite the ceasefire, Israel continued attacks in Lebanon, leading to fluctuating market sentiment. Continued monitoring of the situation is necessary. If a definitive peace agreement is not reached within the two-week period, oil prices could remain volatile. Conversely, if a peace deal progresses and leads to a comprehensive resolution of Middle Eastern issues, oil prices could fall from $90 per barrel to below $70.
On the fundamental side, stronger-than-expected export growth provides solid market support. From a supply perspective, an increasing number of restarted plants and delayed maintenance plans for several units suggest supply reductions may be less than anticipated. As of March 31, the average monthly profit for non-integrated styrene units was -179 yuan/ton, down 215.62% from February. Although theoretical profits turned negative, cash flow profits remained positive. The average monthly profit for PO/SM units was 1,116 yuan/ton, up 17.76% month-on-month, while integrated unit profits reached 933 yuan/ton, rising 21.56%. Driven by high profitability, more units restarted in March, contributing to supply increases in April. Furthermore, maintenance plans for several units scheduled for March-April have been postponed to varying degrees. April styrene production is estimated at 1.5553 million tons, up 1.43% from the early March forecast of 1.5334 million tons.
On the demand side, domestic demand decreased while exports exceeded expectations, providing strong market support. Total demand in April is forecast at 1.5669 million tons, up 0.76% from March. Domestic demand is projected at 1.3669 million tons, down 7.34% month-on-month. This decline is primarily due to sharp increases in raw material prices following geopolitical tensions in March, coupled with a slow post-holiday recovery in end-consumption. Major downstream sectors, including PS, ABS, and EPS, faced difficulties passing on high costs, leading to reduced operating rates starting in late March. In April, operations are expected to remain constrained by profitability pressures with little improvement anticipated. In contrast, external demand strengthened. Supply shortages in Japan, South Korea, India, and Europe, exacerbated by the closure of the Strait of Hormuz, led to active export negotiations in March-April. According to statistics, styrene export volumes for April have already reached 200,000 tons, a 300% increase from the early March forecast of 50,000 tons. This stronger-than-expected export performance has boosted market sentiment and partially offset the decline in domestic demand.
In summary, international oil prices rose then fell in early April, with styrene prices following the volatility. For mid-to-late April, the Strait of Hormuz situation remains unstable, keeping cost-side pressure firm. Fundamentally, preparations for export orders have limited port inventory mobility, and expectations for continued inventory drawdowns provide strong price support. Styrene prices are expected to remain firm in mid-to-late April, trading within a range of 9,500-11,500 yuan/ton. Downside risks include a significant breakdown in oil prices, while upside risks involve further escalation of geopolitical tensions or continued stronger-than-expected exports.
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