04 February 2002 00:00 [Source: ICB]
The permanent closure of Basell's 410 000 tonne/year styrene unit in Wesseling, Germany, is an indication of further capacity rationalisation in Europe and was generally expected by market observers.
The plant had already been mothballed in 1999 and then restarted in July 2000 to guarantee prompt supplies of styrene into BASF's system, as the company was facing delays in supplies from Spain (ECN 31 July 2000).
Site manager Henri Braun said the decision to finally shut down the unit is based 'on a long styrene market, with no immediate recovery in sight'. He also added that the plant was due for an inspection this year, and that this would have proven too costly as the unit had already been operating for 30 years.
From a market perspective, the closure of the Wesseling unit is not expected to create a major shift in Europe's supply/demand balance. 'People will not rush to increase polystyrene (PS) production. Until the PS market turns around, there is enough styrene capacity in place to cover any shortfall,' said an industry source.
Styrene prices have been inching up since the beginning of January due to some co-producer and trader activity on the spot market. However, market participants say that it is too early to speak of improvement in demand, and that the recent spate of buying may have been prompted by restocking. 'We will have to wait until at least the end of this quarter to evaluate how much of this interest is driven by a real surge in derivatives demand,' one producer said.
In terms of further rationalisation, there seem to be no other styrene units that are potentially immediate candidates for closure, as most of the European units are relatively new. However, more industry restructuring is expected to take place this year and may prompt moves towards further capacity rationalisation.
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