China's March styrene exports surge past total for 2020 amid global supply tightness

Singapore — China's exports of styrene monomer have surged in the first quarter amid tight global supply, accelerating its shift from net styrene importer to exporter despite being the world's major demand center.

More than 60,000 mt of styrene has been scheduled to date to load from China in March, according to market estimates. This is nearly 160% higher than China's total styrene exports of 27,020 mt over the full year 2020, customs data showed. Another 10,000 mt has already been scheduled to load for export in April, market sources said.

China is the world's key demand center for styrene, consuming 11.92 million mt and importing 2.83 million mt in 2020, according to S&P Global Platts estimates and customs data.

Of the 27,020 mt exported in 2020, more than 85% was supplied to South Korea, where plant outages and turnarounds shortened domestic supply in the second half of the year.

Demand for China's styrene exports is being driven by production losses due to turnarounds in Asia and plant outages in the US and Europe. In Asia, a heavy turnaround season over February to June and unplanned maintenance in Northeast Asia have tightened supply in the region.

Several Asian countries including South Korea and India typically rely on US-origin supply, but this is expected to remain scarce in Asia in the near term as the polar vortex takes its toll on styrene production. More than 2.5 million mt/year of styrene production capacity was offline in the US on Feb. 26 due to severe weather, according to Platts estimates.

The cargo shortage has exacerbated already tight fundamentals and boosted prices in the US and European markets, but price increases have lagged in China where supply remains available amid high run rates. Domestic prices in East China are also lower than import prices at present, which is further encouraging exports and curbing imports.

"China prices are depressed and have become the lowest among the three regions," a trader said.

The market has prompted traders to work a "reverse arbitrage" by moving China cargoes to Europe, where prices are currently at a premium of more than $300/mt to CFR China values. Considering freight at $100/mt, the spread is attractive to Asian sellers.

As such, market participants expected to see continuing interest in selling Chinese cargoes on an FOB basis to balance out the shortage in other regions, with active FOB China trading heard in H2 February. This trade flow is likely to increase in frequency as China's production expands at incredible speed, with 1.22 million mt/year of capacity slated to come online in H2 March and April.