The oversupply has led to the decline in downstream operating rates

Due to the accelerated startup of PS and ABS plants in the past two years, the market have changed from undersupply to oversupply. In 2023, the expansion of production capacity continues, leading to an exacerbation of the oversupply of PS and ABS. Currently, although demand is expected to increase in 2023, the oversupply situation has not changed and downstream products face high inventory pressures. Since the beginning of 2023, PS plants has operated at low rates, while the operating rate of ABS was relatively high in the earlier period. Since Apr, more plants shut for maintenance and cut production, and the operating rate declined. However, due to the current high production capacity and sustained inventory pressures, supply-demand pressures remain high, making it difficult for the market to improve.

Judging from the current supply and demand side, downstream products of styrene show a year-on-year increase in domestic data for Q2. On the one hand, in the second quarter of 2022, the overall economy was significantly impacted by the pandemic, leading to marked decline in production in China, including in downstream products of styrene, which resulted in a significant contraction in data. In 2023, the influence of pandemic faded, and there is an expectation of growth. On the other hand, the scale of domestic downstream supply has changed significantly, with some products facing supply shortages in 2022, which have now shifted to being in oversupply and in an accelerating phase of excess supply. The actual growth in supply-demand data is in line with expectations. Based on the current situation, styrene downstream production capacity is expected to continue to grow, with potential production cuts in various products. At present, the support from cost side is weak. PS and EPS market is relatively weak, and ABS market still facing losses. If the situation of losses worsens, the scale of production cuts is expected to expand.