CICC Wealth Futures: Styrene prices are affected by crude oil and pure benzene prices; significant fluctuations are unlikely in the short term

Styrene, as a classic cost-driven product, has a rough correlation of 80% and 90% with crude oil and pure benzene prices, respectively. After the rally and subsequent adjustments in this round of market moves triggered by geopolitical tensions, international oil prices still remain in a high-level, choppy trading pattern, while the upward increase in upstream raw-material costs for styrene is irreversible. Constrained by raw-material supply shortages, Asian pure benzene plants cut production and undergo load-reduction maintenance, leading to decreased import expectations. Port inventories continue to be worked down, and since April the drawdown in the domestic pure benzene market has accelerated. The weak fundamentals of pure benzene during the pre-war period have been completely reversed, causing the styrene–pure benzene price spread to passively narrow to low levels. Non-integrated plants fall into losses, while integrated plants’ profit recovery is limited; on the cost side, this provides firm, rigid support for styrene prices. In the future, the US–Iran confrontation will likely persist long term. With international oil prices remaining high and trading in narrow ranges, styrene is expected to move in tandem with pure benzene in a sideways consolidation, and there is unlikely to be a major rise or a major fall in the short term. (CICC Wealth Futures)