Can styrene's "devil attribute" be reproduced?
Styrene Market Analysis: Cost, Supply and Demand Outlook
From the cost side, under the assumption that international crude oil "has a top and a bottom", ethylene will follow crude oil fluctuations but will be weaker than crude oil as a whole. The supply and demand of pure benzene is improving, and the price is expected to continue to be firm. Therefore, the cost of styrene is expected to stabilize, and the room for downward exploration is limited. From the supply side, the planned production capacity of styrene in 2020 is large, but the actual production may not be as expected. Focus on the progress of the deployment of styrene plants in the refining and chemical integration project. From the demand side, due to the serious downstream losses of styrene in the previous few years and the small capacity planning, the demand for styrene will not follow up in 2020 relative to the growth rate of supply. The main downward force for styrene in 2020 comes from the pressure on production capacity, and the downward space comes from the compression space of processing fees. It is expected that the space for further downward exploration on the cost side is limited. Focus on the progress of production capacity. If the production capacity is not as expected, the price of styrene may fluctuate significantly. The overall operating space is expected to be 6600-7800 yuan/ton.
Cost side: ethylene follows crude oil, pure benzene is strong
(1) Ethylene follows crude oil, but is weaker than crude oil
Excess pressure on ethylene is gradually emerging, and prices may fluctuate with oil prices, but the overall price will be weaker than oil prices. At the end of the third quarter of 2019, domestic ethylene inventories increased by 73.3% compared with the beginning of the year, much higher than the increase in the same period in previous years. The increase in inventories is a direct reflection of supply and demand pressure. From the price difference between ethylene and naphtha, it can also be seen that the current profitability of the ethylene industry is poor. Since 2019, the price difference between ethylene and naphtha has been negative, indicating that some enterprises are in a state of loss. Under the huge pressure of capacity investment in the future, we believe that the price difference between ethylene and naphtha will continue to be low, so the fluctuation of crude oil prices will be more smoothly transmitted to the ethylene price end, and the correlation between ethylene and crude oil will be
(2) The price of pure benzene is relatively firm
The price center of pure benzene is expected to increase in 2020. From a fundamental point of view, from 2013 to 2015, after a round of production capacity expansion cycle, the industry's operating rate entered a trough, and the expansion rate of pure benzene production capacity slowed down significantly in the past two years. The downstream consumer demand followed up brightly, and the industry's prosperity rebounded. According to the statistics of Zhuochuang Information, at the end of 2019, Sinochem Quanzhou Petrochemical has 100,000 tons of pure benzene production plan, and the production capacity is small; in 2020, pure benzene has a total of 1.46 million tons/year. Although the output is large, the production time is concentrated in the fourth quarter, and the downstream of pure benzene corresponds to styrene, caprolactam, phenol and other varieties. If the downstream demand is put on time, it can cover the increase of pure benz In addition, 20% of pure benzene in our country is provided by petroleum cracking ethylene units. Under the loss of ethylene, the burden of enterprises will increase, and the supply of pure benzene as a by-product will decrease. Therefore, it is expected that the price of pure benzene will be relatively firm in 2020, and the price center of gravity will be higher than that in 2019.
Supply side: The production capacity launch cycle begins, and the operating rate gradually declines
Pressure on production capacity is high, and styrene is gradually turning into surplus. Before the first half of 2019, styrene was in a high boom cycle, and the industry's production profits were very considerable. The country planned to add more than 10 million tons of new production capacity in the future. According to the current statistics of the production capacity investment plan, in 2020-2023, there are a total of 12.20 million tons of styrene production capacity waiting to be released in China, of which there is a 6.54 million tons/year production capacity investment plan in 2020. However, since most of the production capacity is planned to be put into production in the fourth quarter, especially at the end of the year, it is necessary to be vigilant against the situation that the production is not as
Focus on the commissioning progress of the integrated refining and chemical plant. The commissioning of a single set of plants is often affected by the efficiency of styrene production, and refining and chemical integration refers to the construction of a whole-process production project using crude oil as raw material to various high-value-added chemicals downstream. Therefore, its benefits are evaluated from the perspective of the entire refining and chemical integration project. Since the characteristics of integration help enterprises save huge transportation costs and unit labor costs in the production process, the cost of the entire refining and chemical integration project is low, the overall benefits are better than that of a single set or a plant with a short industrial chain, and the ability to resist risks is strong. The probability of its commissioning is higher. It can be seen from the above table that Hengli Petrochemical and Zhejiang Petrochemical belong to "Hengli 20 million tons/year refining and chemical integration project" and "Zhejiang Petrochemical 40 million tons/year refining and chemical integration project" respectively, so its production capacity is relatively certain as a whole. It was originally planned to be put into production in the fourth quarter of 2019, but the possibility of postponing the start of production is relatively large. Focus on the commissioning dynamics of the two sets of large-capacity plants in 2020. Considering the different accumulation pressure times brought about by the start of production, this may lead to different trends in EB01, EB05, and EB09 contracts.
Low-load operation of the plant may become the norm in the later part of 2020. Construction began to emerge at the end of 2019, and it is expected that the operating rate of styrene will decrease slightly in 2020. Before August 2019, the operating rate of styrene was running between 88.8% and 98%, and the overall operation was at high load. Beginning in August, the operating rate of styrene fell at a high level, and then basically remained below the 85% operating rate level. The reason for the sharp decrease in the operating rate of styrene plants in the later part of 2019 was mainly due to the significant compression of production profits. Although the actual price of styrene was slightly lower than the full production cost of the enterprise in late November 2019, the enterprise still has considerable processing fee income, and the cash flow has not been in crisis. If the production capacity is released in the later stage, it is expected that the market will continue to compress the styrene processing fee until it approaches the cash flow cost of the enterprise, thus forcing the enterprise to reduce the burden and reduce the supply. We expect that under the pressure of medium and long-term production capacity, the center of gravity of styrene prices will be suppressed, and the market will continue to compress the production profit and processing fee income of enterprises. Low-load operation may become the norm in the late 2020.
Demand side: Operating rate is expected to rise, but total production capacity is insufficient to follow up
(1) Poor downstream past benefits
Before 2019, the three major downstream production benefits of styrene were not good, but it is expected that the downstream benefits will gradually improve in 2020, and the operating rate is expected to rise.
For EPS, its end point corresponds to the sheet metal and foam industry. Since 2015, under the pressure of overcapacity and supply-side reform, the EPS industry has begun to clean up its production capacity, and some backward production capacity has been gradually eliminated. The industry's operating rate has increased from 40.79% to 48%, but it is still in excess.
For ABS, its downstream corresponds to the household appliance industry. In recent years, the growth rate of household appliance demand has gradually slowed down, and ABS revenue has narrowed. Among them, the continuous ontology ABS system has more serious losses, while the emulsion grafting and blending ABS method has relatively considerable profits due to lower costs. At present, 88.73% of the devices on the market are emulsion grafting and blending, so the operating rate of ABS devices is at a high level of more than 90%.
For PS, its downstream corresponds to the electronic and electrical industry. From 2011 to 2015, our country's PS production capacity expanded rapidly, but due to the gradual slowdown in our country's economic growth in 2015, the excess pressure of the PS industry gradually became apparent. From 2016 to 2018, the production profit of the PS industry continued to be sluggish. Since 2019, the prosperity of the electronic and electrical industry has picked up, and the PS industry has been profitable for most of the time.
The expansion of downstream production capacity of styrene is affected by both economic benefits and technical barriers. On the one hand, the production efficiency of ABS and PS was poor before 2019, and most of the time it was in a loss state, so the current downstream production capacity investment plan is relatively small; on the other hand, there are industry technical barriers in the downstream of styrene. Under the low production efficiency, the downstream production capacity will be insufficient in the next 1-2 years.
(2) Insufficient downstream production capacity to follow up
According to our statistics on the future new production capacity of styrene downstream, and the styrene consumption calculated from this, the growth rate of styrene demand relative to supply is insufficient. By the end of 2020, our country has 3.49 million tons of downstream production capacity released, corresponding to 2.8798 million tons of styrene consumption. In the same time period, 6.54 million tons of styrene production capacity will be put into production for styrene. Theoretically speaking, the overall production capacity is excess. From the perspective of import substitution, our country imported 2.887 million tons of styrene in 2018. Since our country does not have an advantage in production costs, styrene import space cannot be completely replaced. With the deployment of styrene production capacity, the prosperity of the styrene industry will gradually decline in the medium and long term.
To sum up, from the cost side, under the assumption that international crude oil "has a top and a bottom", ethylene will follow the fluctuation of crude oil but will be weaker than crude oil as a whole. The supply and demand of pure benzene are improving, and the price is expected to continue to be firm. Therefore, the cost of styrene is expected to stabilize, and the space for downward exploration is limited. From the supply side, the planned production capacity of styrene in 2020 is relatively large, but the actual production may not be as expected. Focus on the progress of the deployment of styrene plants in the refining and chemical integration project. From the demand perspective, due to the serious downstream losses of styrene in the previous few years and the small capacity planning, the demand for styrene will not follow up in 2020 relative to the growth rate of supply. The main downward force for styrene in 2020 comes from the pressure on production capacity, and the downward space comes from the compression space of processing fees. It is expected that the space for further downward exploration on the cost side is limited. Focus on the progress of production capacity. If the production capacity is not as expected, the price of styrene may fluctuate significantly. The overall operating space is expected to be 6600-7800 yuan/ton.
