OUTLOOK '11: New landscape for Europe styrenics in 2011

27 December 2010 15:30  [Source: ICIS news]

By Linda Naylor

LONDON (ICIS)--The European styrenics market will head into 2011 with a significantly altered landscape following the recent creation of Styron and of Styrolution. 

Dow Chemical announced at the beginning of March that it would sell its Styron businesses to an affiliate of private equity group Bain Capital, and at the end of November INEOS, having jettisoned Nova from its joint venture partnership, said it would form a 50:50 styrenics operation with BASF, creating Styrolution.

The Styrolution joint venture would see the firms combining their global businesses in styrene monomers (SM), polystyrene (PS), acrylonitrile butadiene styrene (ABS), styrene-butadiene block copolymers (SBC) and other styrene-based copolymers as well as copolymer blends. It was expected to be completed in 2011.

This would leave the European PS market dominated by the three major suppliers - Styron, Styrolution and Total Petrochemicals - with Polimeri Europa also a significant player.

In terms of market dynamics for 2011, PS was expected to remain firm and most buyers acknowledged that next year would be a seller’s market.

This was due to the permanent closure of over 10% of installed PS capacity in 2009, when demand was weak and the European market in oversupply in spite of a 13% cut of installed capacity in 2006.

“We think that the European PS market in 2011 will be structurally undersupplied,” said a major producer. “Demand has come back and we have struggled to supply in 2010.”

Availability had been affected by unplanned outages, and buyers had experienced difficulty procuring volumes on several occasions in 2010. While they accepted that this could continue into 2011, some were taking strategic decisions to move away from PS, to markets like polypropylene (PP) or polyethylene terephthalate (PET) where they saw better opportunities for future growth.

PS volumes globally had slumped in recent years as new technologies, particularly in the electronics sector, had slashed volumes.

In the expandable PS (EPS) market, sources on both sides of the European EPS market were optimistic about the prospects for consumption in 2011. Industry players said 2010 had been a recovery year, with substantial growth rates in volumes.

They were virtually unanimous in predicting that further growth would be achieved in 2011, although the consensus was that the rate of growth was likely to be lower than in 2010, which saw a marked bounce from recession levels in 2009.
The pace of EPS volume growth expected in 2011 would be closer to trend growth for the industry. The drive for energy conservation should continue to be the main impetus for EPS consumption. Another development in the industry was the increasing share of output in the manufacture of grey EPS, which can deliver the same amount of insulation for lower thickness and commands a premium in price terms.

Moderate growth was likely in the ABS and styrene acrylonitrile (SAN) markets, and for prices to firm accordingly, at least in the first half of the year, sources predicted.

One ABS producer said it experienced 20% growth this year, so sales were almost back to pre-crisis levels. More measured expansion was therefore expected in 2011.Strong demand was seen at the end of 2010, particularly in the downstream automotive sector, and was expected to continue into the new year as European cars proved attractive to Asian consumers.

European buyers feared a difficult 2011 period. Relatively little competitive material was imported from Asia in 2010 compared to previous years due to the weak euro against the US dollar and strong regional demand.

“The first half of the year will be good for producers, and then we’ll start getting more imports in the second half,” forecast an ABS buyer.

New capacities were due online in China, including a 300,000 tonne/year ABS joint venture between LG Chem and China National Offshore Oil Corp (CNOOC) in Huizhou, Guangdong province, which may free up material for export, according to one European customer.

Styrenics producers were quietly optimistic that they would see some demand growth in 2011, and though feedstock movements would largely determine prices, they conceded that a key driver in some styrenics markets would be on how Asia performs next year.

Truong Mellor, Amandeep Parmar and Peter Gerrard contributed to this article

To discuss issues facing the chemical industry go to ICIS connect
For more on styrenics visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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