Industry Investment Rating - Pure Benzene: Sideways [2] - Styrene: Sideways [2] Core Viewpoints - In the fourth quarter, the pure benzene and styrene industry chain may need time to recover. Pure benzene faces dual supply pressures of increased import volume and new capacity ramping up, with downstream profit issues posing potential risks of reduced production. Styrene has a higher potential supply growth rate, and potential stockpiling problems may become a core contradiction. The industry needs to maintain low - profit states for a longer time to reduce supply and achieve a balance [4]. Summary by Directory 1. The biggest change in the industry chain in the third quarter was the rapid decline in styrene profits - In the third quarter, styrene prices weakened, dropping from around 7,600 yuan/ton at the end of June to about 6,900 yuan/ton recently. Pure benzene prices fluctuated less, remaining in the range of 5,800 - 6,000 yuan/ton. The trading focus shifted from compressing pure benzene valuation in the first half of the year to styrene profit decline in the third quarter [13]. - The root cause is the phased strength - weakness transformation of the pure benzene and styrene pattern. High styrene production profits in the first half of the year led to increased supply, resulting in inventory accumulation and a narrowing of the styrene - pure benzene spread [14]. 2. Pure benzene: New capacity launches are not over, and the expected import volume is rising again - From January to August, the total supply of pure benzene was 21.05 million tons, a year - on - year increase of 10.9%. Domestic production was 17.37 million tons (a 6.0% increase), and imports were 3.68 million tons (a 43.7% increase). High supply growth led to the failure of seasonal destocking in the first half of the year [18]. - In the fourth quarter, the import volume of pure benzene may rise again. South Korea's maintenance losses will decrease, and European pure benzene may flow to East Asia. New capacity, such as from Henan Fengli and Hunan Petrochemical, will be released, and planned maintenance may decrease. The monthly average output of petroleum benzene is expected to be around 2.01 million tons [19][22][23]. - Downstream industries are restricted by profit issues, and potential production cuts are a concern. New downstream capacity may not be smoothly implemented due to low profits. For example, caprolactam profits are at a five - year low, and styrene non - integrated device cash - flow profits are negative [26]. 3. Styrene: Pay attention to potential stockpiling contradictions 3.1. Demand resilience cannot match the supply increase, and the recent styrene profit center has significantly declined - The styrene - pure benzene spread has dropped from 2,000 yuan/ton in the middle of the year to around 1,000 yuan/ton, and non - integrated styrene profits have reached the lowest level this year [32]. - Styrene demand is better than expected, with 1 - 8 month production of PS, ABS, and EPS increasing by 10.3%, 24.3%, and 6.1% respectively year - on - year. However, high production profits in the first half of the year led to increased supply, with the average monthly output from July to August reaching 1.6 million tons, and the total output from January to August increasing by 16.6% year - on - year [33]. 3.2. There are concerns about weakening demand in the fourth quarter. Pay attention to whether the divergence between 3S and end - users will converge - In the third quarter, there was a divergence between the 3S开工率 and end - user demand growth. 3S production increased, but white - goods production decreased. In September, the total production of air conditioners, refrigerators, and washing machines decreased by 7.2% year - on - year [41]. - In the fourth quarter, the end - user demand for household appliances is expected to continue to decline, with the total production of three major white - goods in October decreasing by 9.9% year - on - year. Factors such as tariffs and the marginal decline of national subsidy policies affect demand. If end - user demand is weak, 3S enterprises may cut production, weakening styrene demand [45]. 3.3. The core issue for styrene in the future is how to solve potential stockpiling problems - If the 1.2 million tons/year capacity of Jilin Petrochemical and Guangxi Petrochemical is put into production in the fourth quarter, styrene stockpiling may exceed 250,000 tons, potentially leading to stockpiling at the East China main port [57]. - To solve this problem, styrene non - integrated profits need to stay below the break - even point for a long time to force more supply cuts. The industry's operating center may drop to around 70%. Next year, with less new capacity and stable 3S demand growth, the industry may return to a balanced state [57]. 4. Investment suggestions - In the fourth quarter, the pure benzene and styrene industry chain may not improve significantly. Pure benzene will face supply pressures, and styrene may have more prominent potential contradictions. The industry needs to maintain low - profit states to reduce supply, and the industry operating center may drop to around 70% [64]. - The strategy is to short the EB - BZ spread on rallies. The price range of pure benzene is expected to be 5,600 - 6,250 yuan/ton, and that of styrene is 6,500 - 7,350 yuan/ton [65].