Entering 2025, China's styrene market continues to operate within a capacity expansion cycle, exhibiting pronounced seasonal shifts in supply-demand dynamics. Supply pressures intensified in the third quarter, becoming the primary factor dragging down market prices. The second and fourth quarters, however, returned to relative equilibrium, with unexpected supply tightening signals emerging particularly toward year-end. This dynamic evolution not only closely tracks changes in main port inventories but also reveals the underlying logic of the market seeking a new equilibrium under immense capacity pressure.

Peak Pressure: Elevated Styrene Supply-Demand Gap and Price Pressure in Q3

The third quarter of 2025 marked the most pronounced period of supply-demand imbalance in the styrene market, with oversupply pressures reaching a phased peak. Specifically:

Weekly styrene production in Q3 significantly exceeded the highest values recorded over the preceding three years. From mid-July to early September, weekly output consistently surpassed 370,000 tons, substantially higher than the annual weekly average of 347,000 tons. The supply-side changes were largely driven by improved industry profitability, with the average price spread between pure benzene and styrene reaching 1,317 RMB/ton in Q3—above the annual average. Particularly from late Q2 to early Q3, persistent oversupply weighed on market prices. With reduced macroeconomic impacts in Q3 compared to Q2, the fundamentally weak trend pressured prices. Spot styrene prices fell from the Q2-end peak of 8,205 RMB/ton to 6,810 RMB/ton by the end of Q3, a 17% decline.

Structural Shift: Return to Equilibrium in Styrene Supply-Demand During Q2 and Q4, with Year-End Volatility

In stark contrast to the extreme pressure of Q3, the weekly supply-demand differential for styrene in Q2 and Q4 mostly hovered near the three-year average, indicating the market maintained a fragile dynamic equilibrium during the rest of the period. This equilibrium stemmed from the market's self-regulatory mechanism: when prices fell below cost levels due to oversupply, some high-cost plants proactively reduced operating rates or scheduled maintenance. This curbed supply growth, allowing the supply-demand gap to normalize.

Entering November, reduced styrene supply emerged as the primary factor, driven mainly by unplanned maintenance at some large-scale plants and limited incremental output from newly commissioned capacity. This shift also provided fundamental support for the year-end phase of styrene price recovery.

Inventory Response: Lagging Reflection of Supply-Demand Gap and Market Sentiment Indicators

Port inventories play a pivotal intermediary role in how the supply-demand gap influences the market. A clear pattern emerges: when the weekly supply-demand gap widens, inventories at major ports correspondingly rise, though often with a lag. This delay stems from the physical logistics and statistical cycles involved between domestic production or import arrivals and the actual recording of goods in port inventories.

The persistent supply-demand gap in the third quarter ultimately manifested as a continuous climb in inventories at major ports in East China. The abrupt narrowing of the supply-demand gap in November did not immediately trigger rapid inventory drawdowns. However, it altered expectations for inventory growth, thereby influencing market participants' sentiment and trading strategies ahead of actual inventory data. Subsequently, inventories did exhibit a downward trend. Thus, inventories are not merely a static reflection of supply-demand outcomes; their trends and expectations also function as a crucial sentiment indicator shaping the rhythm of price fluctuations.

Throughout the year, the weekly linkage between styrene's supply-demand gap and price movements followed this logic:

First, phased dominance: The supply-demand gap is the primary factor determining medium-to-long-term price direction. As indicated in the red box below, during the third quarter when macro influences weakened, the degree of deviation from the three-year high in the supply-demand gap showed significantly enhanced negative correlation with prices.

Second, rhythm adjustment: Inventories act as both a “buffer” and a “signal light.” The accumulation and depletion of these inventories, with their inherent lag within each phase, modulate the pace and magnitude of price declines or increases, smoothing market volatility.

In summary, the trajectory of the styrene market in 2025 demonstrates that, against the backdrop of expanding capacity and intensifying macroeconomic disruptions, grasping the complete chain from “supply-demand imbalance” to “inventory validation” and then to “price reaction” forms the foundation for analysis and risk management during the ongoing cycle of styrene capacity releases.

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