Following the closure of the Strait of Hormuz, crude oil supplies to Asia have been significantly affected, with refining and petrochemical plants reducing operating rates to varying degrees or even halting production. Shortages of crude oil and naphtha have led to a decline in the operating rates of cracking and reforming units, resulting in tighter pure benzene production. Domestic imports of pure benzene have decreased, and coupled with the inelastic downstream demand for styrene, styrene prices are receiving strong support.

Benzene Market Quotes Remain Firm

Although tensions between the US and Iran have eased somewhat, shipping issues in the Strait of Hormuz remain volatile. Crude oil prices remain high, with a significant reduction in Middle Eastern crude supply. As crude oil supply is unlikely to recover promptly in the short term, domestic and international benzene quotations remain relatively firm.

Data released by the General Administration of Customs shows that in March, China imported 458,700 tonnes of benzene, a significant year-on-year decrease but a slight month-on-month increase. In April, the overall operating rate of benzene plants declined. As of 24 April, the operating rate stood at 69.48%, down 0.81 percentage points from 70.29% at the beginning of the month. With domestic supply tightening, reduced imports and resilient downstream demand, benzene inventories have fallen slightly.

Styrene supply remains at neutral levels

Integrated styrene plants, benefiting from self-supplied feedstock, maintained overall profit margins at relatively high levels for the period, whilst gross margins for non-integrated plants showed a downward trend. As operating rates at Asian refining and petrochemical plants declined, both ethylene and benzene supplies faced tightening conditions; price increases for these two commodities raised the cost of externally sourced benzene and ethylene, leading to a decline in gross margins for non-integrated plants.

In April, domestic styrene plants continued their seasonal maintenance schedule, with the weekly capacity utilization rate falling from 72.43% to 71.94%. In May, 750,000 tons of non-integrated capacity underwent maintenance, whilst 920,000 tons of capacity was restarted. After comprehensive calculations, output increased by 3,260 tons per week and the operating rate rose by 0.67 percentage points, indicating limited changes in supply.

Styrene inventories have declined

In April, port styrene inventories showed a seasonal decline, remaining at normal levels for the period. The downstream 3S plastics market remained relatively firm, with styrene consumption increasing year-on-year. Consequently, styrene producers’ inventories fell to below-average levels for the period, thereby supporting price increases.

Downstream 3S plastics output up year-on-year

In April, overall output of the 3S plastics sector—polystyrene, expanded polystyrene and styrene-butadiene rubber—reached a high for the same period. The impact of high styrene prices on demand for polystyrene and expanded polystyrene diminished, with weekly output for both showing year-on-year growth. Meanwhile, ABS production margins contracted significantly due to rising raw material costs, leading to a gradual decline in weekly output. However, the market has shown considerable resilience, and downstream demand is expected to recover once styrene prices stabilize.

Furthermore, due to capacity expansions in recent years, the EPS market is characterised by high operating rates and high output. Currently, the EPS operating rate is at a relatively high level for this time of year. The operating rate for caprolactam has fallen year-on-year, whilst output remains flat; caprolactam production is a potential constraint on the growth of benzene demand.

The spread between benzene and styrene prices is set to widen

In May, the navigability of the Strait of Hormuz is the focus of market attention. Negotiations between the US and Iran face significant uncertainty, with market sentiment fluctuating. Looking at international crude oil prices, the price centre has shifted downwards; cost-side support for benzene and styrene is expected to be limited, and close attention should be paid to global crude oil supply conditions.

Regarding benzene, current operating rates are below the seasonal average. However, with plant maintenance scheduled to conclude in May, it is anticipated that approximately 990,000 tons of benzene capacity will be restarted between late May and early June. This is expected to increase weekly output by 10,000 tons, with the operating rate rising by 3.52 percentage points to 77%, a level above the seasonal average. Furthermore, benzene imports in May are still expected to decline year-on-year.

Styrene spring maintenance remains at a neutral level, with limited supply fluctuations in May. Global styrene plant operating rates are at a relatively low level for this time of year in recent years. Domestic export demand is strong, coupled with relatively robust performance in the downstream 3S market, so styrene demand is bound to rebound. Overall, styrene fundamentals are stronger than those of benzene, and the price spread between the two will widen.

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