FocusNorth China SM prices soar on tight supply, demand recovery

27 April 2011 06:25  [Source: ICIS news]

By Amanda Zhang

SHANGHAI (ICIS)--China’s styrene monomer (SM) values are expected to continue rising in the north of the country through the first half of May on the back of tight supply and recovering demand, market sources said on Wednesday.

SM prices were assessed at yuan (CNY) 11,300-11,350/tonne ($1,731-1,738/tonne) DEL (delivered) at Tianjin in north China on 25 April, an increase of CNY1,250/tonne compared with 2 April, according to Chemease, an ICIS service in China.

Northern China’s SM market has been on an uptrend since the beginning of April as downstream expanded polystyrene (EPS) foam makers resumed production and began to build their inventories.

Production was hampered after the Ministry of Public Security imposed restrictions in the middle of March for better fire-proof construction materials, effectively banning the use of EPS, which is SM's largest downstream market in China. Many EPS producers were forced to cut their operations or even shut down after their resins failed to meet the revised standards under the stricter rules.

However, EPS makers successfully lobbied the government in April to lift its ban on the material and allow the use of block flame retardant EPS of better quality instead.

“The authorities now allow EPS resins to be used in building construction in certain regions in eastern and northern China,” an eastern Chinese producer said on 13 April.

Areas in northern China where the restrictions have been eased include Jilin province, and as more EPS producers restart their operations, the demand and prices of feedstock SM have picked up accordingly.

“We are eager to purchase SM to keep up production because there are considerable profits at present,” an EPS producer said.

Recent turnarounds at major SM production facilities have led to a supply crunch and exerted upward pressure on prices, market sources said.

Qilu Petrochemical shut its 200,000 tonne/year SM unit at Zibo city for maintenance on 4-15 April, while Shandong Yuhuang Chemical took its 200,000 tonne/year SM plant at Heze city off line from 20 February to 26 April, sources from both companies said. Both plants are located in Shandong province.

Although Qilu and Shandong Yuhuang have restarted their plants, most of the output is for previously contracted cargoes, with limited supply left for the spot market, the sources added.

Leading producer Tianjin Dagu is operating its 500,000 tonne/year SM unit in Tianjin city at 70% capacity. The unit was shut down on 7 March and restarted on 5 April, a company source said.

Tianjin Dagu has a new 100,000 tonne/year EPS plant that is expected to start up in the middle of May, as well as a new acrylonitrile-butadiene-styrene (ABS) plant with two lines, each with a capacity of 200,000 tonnes/year.

One of the lines is operating at a 70% rate, while the other is expected to start up in the second half of the year, the source added.

Despite the impending start-up of Tianjin’s new downstream units at the Tianjin city site, the company’s SM output will still remain mainly for captive use with little surplus left for sale to the spot market, industry sources said.

Apart from plugging the shortage of SM supply, a large amount of SM cargoes at Jiangsu province in the east has been transported to the north of the country to gain more profits, a trader in east China said.

“Sales in eastern China are not going as well as in northern China as the uptrend is suppressed in eastern China on the back of inventory pressure,” he added.

Northern China is still expecting to receive more SM cargoes from the east as the sector continues to consume more than it produces, industry sources said.

The demand for SM will remain robust in the north, as several downstream ABS, EPS and polystyrene (PS) producers are planning to build facilities there in the second half of the year, industry sources said.

Jiangsu Garson Chemical Industry is expected to start up its new 120,000 tonne/year EPS plant at Dalian city in late May.

Meanwhile, Tianjin Rentai Chemical is building a 400,000 tonne/year PS plant at Tianjin city, and the company plans to start the first phase of production at 140,000 tonnes/year in August.

Major SM producers in China include BP-Secco Petrochemical, CNOOC-Shell Petrochemical and Leasty Chemicals.

Styrene monomer is most commonly used in the production of styrene homopolymers and copolymers, which are either solid or expandable.

Around half of global styrene consumption is used to make PS, which is used mainly for packaging applications such as containers, closures, lids and vending cups. The remaining markets where styrene is used include construction; electrical and electronic parts; domestic appliances and housings; household goods and home furnishings; and toys, sporting goods and recreational articles.

Additional reporting by Echo Chen

($1 = CNY6.53)

For more on styrene monomer, visit ICIS chemical intelligence
Please visit the complete ICIS plants and projects database
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Amanda Zhang
+65 67804359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly