APIC ’07: Global SM market faces downturn

17 May 2007 13:26  [Source: ICIS news]

TAIPEI (ICIS news)--The styrene monomer (SM) market could be heading for a downturn as several projects in Asia and the Middle East start up and an eventual cutback in production is inevitable, an official from Japan’s Asahi Kasei Chemicals said on Thursday.

 

“SM’s growth rate at 2-3% [is] not enough to absorb new capacity, the market is already in oversupply,” he said at the 28^th Asia Petrochemical Industry Conference (APIC) in Taipei.

 

“Production cutback in northeast Asia is inevitable. That’s why we decided to close the No 1 line,” he added.

 

In the last two years, China added new capacities through the joint ventures Shanghai Secco Petrochemical and CNOOC Shell Petrochemical.

 

Another 800,000 tonnes/year of new SM capacity from Formosa Chemicals and Fibre Corp and Samsung Total Petrochemical will be added this year, followed by close to 1m tonnes/year in 2008.

 

Next year, Jubail Chevron is due to start up its 777,000 tonne/year project, while Lotte Daesan’s 150,000 tonne/year SM expansion is scheduled to come on stream in June.

 

The new capacities would also hit North American producers who would have to reduce their operating rates and exports, the official said. SM exports, based on cheap ethylene, from the Middle East would gradually flow into Asia and Europe, he added.

 

To prepare for this, Asahi Kasei utilised a relatively high portion of SM for captive use and had reduced exports, especially to China, the official said.

 

Looking downstream the outlook for products such as expandable polystyrene (EPS), acrylonitrile butadiene styrene (ABS) and styrene butadiene rubber (SBR) was healthy, he added.

 

“The Chinese are very optimistic about the demand for EPS, especially for construction. It is expected to grow by 10% or more,” the official said, adding that there was also potential for export growth to North America, eastern Europe and Russia.

 

Despite a recovery in SM prices recently, the margins were still not enough for producers because of high raw material costs, the official said.

 

The Japanese major had kept its crackers operating at full rates despite record-high naphtha prices, he added.

 

Although ethylene derivatives were not performing, the company still needed propylene and butadiene feedstocks, he said, adding the other downstream products were still able to cover costs.

 

By: Florence Tan
+65 6780 4359

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