Prediction of China's Styrene Market in May 2011  

After the Chinese New Year (February 3), styrene prices in China did not rise as expected. Instead, they once fell below RMB10 000/t, due to high inventory levels and the sluggishness of the downstream EPS (expanded polystyrene) market. Meanwhile, raw materials prices kept at high levels. As a result, styrene producers kept losing money in the past two months. Some styrene plants had to suspend production due to high production costs. However, after having been sluggish for more than two months, styrene prices in China may go up in May, mainly due to the following factors:
   1. When the styrene market was sluggish in March and April, the styrene import market was also very plain. In May, imports will decline significantly compared to March and April.
   2. Starting from the end of April, there is a remarkable shortage of styrene in North China, mainly because many styrene producers in North China stopped production in the past two months. In addition, the downstream market demand recovers significantly. As a result, the supply of styrene in North China falls short increasingly. As Tianjin Dagu Chemical Co., Ltd., Shandong Yuhuang Chemical Co., Ltd. and Shandong Huaxing Petrochemical Group recover their styrene production, the shortage of styrene in North China can be eased. But in Northeast China, except for Daqing Petrochemical Company, other styrene producers will all continue stopping production in May. And styrene produced by PetroChina Panjin Petrochemical Company and Tianjin Dagu Chemical Co., Ltd. is mainly for their own uses. As the downstream market demand for styrene increases, the supply of styrene will continue to fall short in May.
   3. The impact of high crude oil prices will fully pass down to the downstream industrial chain in May. Because crude oil futures prices keep more than US$100 /barrel in April and May, the downstream industrial chain will react dramatically to such high oil prices in May. China needs to import a large amount of styrene, mainly from South Korea and Japan. If oil prices are too high, styrene producers in these countries will cut or even stop their production. This will make the import price of styrene go up.
   In May, it is expected that the short supply of styrene can hardly be reversed, but the demand for styrene will increase significantly compared to April. Due to short supply and cost hike, styrene prices will go up in May. Based on the analysis of the cost factor alone, it is expected that styrene prices in the Chinese market will break through the RMB11 500/t mark and then continue to go up in May.