Introduction: Since the start of the second quarter, as crude oil price hikes driven by geopolitical conflicts have transitioned into a phase of range-bound digestion, the impact of styrene market supply and demand has increased. Amid unfavorable supply-demand dynamics and rising intercontinental freight rates, arbitrage activities in the styrene US dollar market have decreased, leading to a reduction in China's styrene exports.

I. International Styrene Market: Rally Then Correction

Since the start of the second quarter, following significant gains in March driven by geopolitical tensions and other factors, crude oil prices experienced wide fluctuations in April and May, with an overall downward trend. This subsequently influenced the petrochemical market, which corrected after its earlier rally. Looking at intercontinental styrene market data, as of May 14, the CFR China closing price stood at $1,215/mt, down 12.27% from the end of March. Market sources indicate this was mainly due to raw material prices correcting after their rally, ample market supply, and a lack of improvement in downstream demand, leading to a market pullback after the earlier uptrend. The European market closed at $1,510/mt FOB ARA, down 10.73% from the end of March, attributed to softer raw material costs and the arrival of some arbitrage cargoes from Asia to the US. The US market closed at $1,364/mt FOB US Gulf, down 5.69% from the end of March, pressured by falling crude oil and feedstock prices, the restart of production units, and poor styrene sales.

II. Increased Difficulty in Intercontinental Arbitrage Operations

Since the start of the second quarter, the price spread between the Asian and European markets has fluctuated within a range of -$415.5/mt to -$205/mt. Timing-wise, the spread was wide in mid-to-late April and early May, suitable for arbitrage; however, at other times, rising freight costs made long-distance shipments less viable for arbitrage. The price spread between the Chinese and US markets ranged from -$270/mt to -$81/mt. Data shows that freight from China to the US gradually rose to around $178/mt. While the theoretical arbitrage window between China and the US was open during April, it closed in May. Market reports indicate no actual styrene export deals to the US were concluded, primarily because the US itself is a major styrene exporter, along with tariff impacts. Overall, some deep-sea styrene exports occurred in April, but negotiations decreased in May.

Regarding Asia's short-sea trade, in April, the price difference between Chinese styrene and that in neighboring countries was above theoretical freight costs. Additionally, supply-demand adjustments driven by crude oil shipping and price hikes continued to support relatively good export deals for Chinese styrene. In May, freight costs rose, and as various regions' supply and demand balances were sorted out, the demand for imported styrene weakened. Consequently, China's styrene exports declined in May, and negotiations for June exports also decreased. Based on aggregated market information, China's styrene exports in April totaled 200,000 tons. According to preliminary statistics from chempricehub, the expected styrene export volume for May 2026 is approximately 160,000 tons (excluding deferred volumes from April that were not shipped).

III. Expected Decline in China's Styrene Exports in Mid-to-Late Q2

According to intercontinental market sources, China's styrene export volume in the first quarter of 2026 increased by 179.92% year-on-year. Exports in the second quarter are expected to rise first and then fall. Due to the large export base in April and May, the second quarter is anticipated to still see a year-on-year increase of over 140%. However, after this short-term "boom," as the market returns to normal rationality, styrene exports are expected to gradually shrink. Reasons include: International trade policy games; the situation in the Middle East has increased deep-sea shipping costs, which significantly inhibits intercontinental trade between China/US and China/Europe, while promoting a surge in short-term, localized transactions. As the impact of geopolitical conflicts weakens or ends, intercontinental trade volumes will decrease. Furthermore, the development of China's international trading market channels remains slow and imperfect. The temporary increase in export volume is simply a result of regional petrochemical supply reductions caused by heightened geopolitical conflicts. Looking at the nature of major styrene-exporting regions, when Europe chooses sources for imported styrene, the Middle East is the preferred option, followed by the US. The shipping distance significantly reduces the probability of Chinese styrene being sold to Europe. The difficulty of deep-sea export operations remains extremely high.

Based on market information for mid-to-late Q2, styrene production units in Europe and the US are gradually restarting after maintenance, which will likely reduce their need for imports. The trend of petrochemical market volatility exacerbated by the geopolitical situation is expected to weaken in mid-to-late Q2. Hence, China's styrene exports are anticipated to show a declining trend.