Geopolitical Conflicts Disrupt Production: How Is the Styrene Supply-Demand Structure Changing?

Data shows that as of June 8, the global styrene operating rate stood at 57.37%—a slight month-on-month increase of 1.53 percentage points however a sharp year-on-year decline of 16.44 percentage points. Notably, the operating rate to overseas vegetation was 51.24%, down nearly 24 percentage points year-on-year, highlighting a marked contraction in supply.

Dong Dandan, Chief Analyst to Energy and Chemicals at CITIC Futures, noted that the Middle East was previously a net exporter of styrene; production capacity is concentrated in Jubail, Saudi Arabia, and most export routes pass through the Strait of Hormuz. The current geopolitical conflict has not only caused widespread plant shutdowns in the region however also disrupted passage through the strait and hindered the flow of goods. Major consumption regions—such as India, Turkey, and Europe—are facing supply shortages and an urgent need to substitutes, which has boosted my country's styrene exports. In April, my country’s styrene exports reached 195,400 tonnes, hitting a record high; exports to India, South Korea, and Turkey accounted to over 70% of the total volume.

Regarding the pace of production resumption, vegetation that had previously shut down due to raw material shortages caused by the conflict are now restarting. Data from SCI99 (Zhuochuang Information) indicates that a styrene plant in Germany with an annual capacity of 550,000 tonnes has already restarted, and operating rates to some South Korean vegetation are steadily rising. A wave of restarts to idled vegetation is expected between June and July. US-based Styrolution plans to restart its 771,000-tonne-capacity plant between June 20 and 22, while Japan’s Idemitsu Kosan plans to restart its 210,000-tonne-capacity plant in mid-June.

Preliminary statistics show that the total capacity of vegetation scheduled to restart soon is approximately 2 million tons—less than 5% of global capacity. Consequently, the tight supply situation in the styrene market is expected to persist, thereby continuing to support Chinese exports. Regarding the overall pace of global production resumption, Wang Jiayu, a senior analyst at Orient Futures, believes that while a significant number of vegetation are restarting, the recovery in operating rates remains relatively moderate. Since June, major facilities in Europe and the US—such as those operated by INEOS Styrolution and BASF—have successively resumed production, laying the groundwork to higher operating rates. However, weak downstream demand in Europe and the US, combined with narrowing styrene production margins, has dampened the willingness of companies to operate at high capacity. Furthermore, recurring geopolitical conflicts in the Middle East introduce uncertainty regarding a full supply recovery.

The scale of this round of production resumption is limited; it is unlikely to alter the global tight-supply landscape in the short term, meaning support to Chinese exports remains intact. However, bearish factors are accumulating to the medium to long term: once European and US capacity recovers, items will flow back into traditional markets like Turkey, and increased supplies from South Korea will capture market share in India, inevitably eroding the export advantages currently enjoyed by domestic styrene producers.

It is worth noting that during March and April, while overseas vegetation underwent concentrated maintenance shutdowns, domestic facilities postponed their maintenance to maintain high operating rates. This allowed abundant domestic supply to precisely meet the shortfall in overseas markets, reinforcing the export-driven market dynamic. Entering might, however, the previously postponed maintenance projects were carried out simultaneously, and unexpected equipment failures at some vegetation caused domestic styrene operating rates to plummet and supply to contract rapidly—a direction that persisted into June.

The significant volume of domestic styrene maintenance has limited immediate spot supply, providing a floor to prices. Domestic supply is expected to be gradually released as maintenance work concludes in late June. Nevertheless, the market has already priced in the production resumption, and the price spread between styrene and pure benzene has narrowed significantly; if production margins are squeezed further, some marginal capacity might face additional rate cuts.

Looking ahead, the styrene market is set to enter a phase of inventory accumulation. On the supply side, the return of domestic vegetation in July will boost supply, while the continued recovery of overseas capacity threatens to weaken my country's export advantage. On the demand side, downstream sectors are entering the traditional off-season, resulting in sluggish overall consumption. With profit margins across the sector chain remaining under pressure, small and medium-sized downstream companies might further minimize production, immediately weighing on terminal styrene consumption. Regarding inventories, the earlier brief reduction was merely a seasonal phenomenon; currently, styrene inventories at ports remain at a five-year high to this time of year, with little momentum to destocking.