02 December 2011 15:56 [Source: ICIS news]
By Elaine Burridge and Andy Brice
LONDON (ICIS)--Soaring production costs and lacklustre demand continue to take their toll on the styrenics chain. Styrene has suffered a sustained period of volatility as unpredictable feedstock costs and variable derivative demand have combined with concerns over excess capacity and substitution downstream.
Nevertheless, some suggest that the outlook for the aromatic is looking more promising and stable, although significant challenges remain.
Styrene is entering a period of transition, where demand growth is likely to overtake capacity additions in the next three years. This was the view of Martin Pugh, president Europe, the Middle East and Africa at Frankfurt-headquartered styrenics producer Styrolution, who spoke recently at the ICIS European Aromatics & Derivatives Conference in Amsterdam, the Netherlands.
This, he said, would lead to operating rates gradually returning to around 90% from the 80% level seen since the downturn towards the end of 2008.
Homoud J Al-Enezi, production leader for ethylbenzene/styrene monomer at Kuwait’s Equate Petrochemical Company agreed that styrene plant utilisation should rise in the near future. He did, however, add the caveat that this was dependent on the eurozone crisis coming under control.
Pugh noted that global styrene demand growth forecasts have been reduced to 3.3%/year from previous expectations closer to 4%/year, but growth levels varied between the different downstream sectors.
In his estimates for future supply and demand worldwide, Pugh factored in an additional 1m tonnes/year of new capacity globally for 2014, plus 500,000 tonnes/year for 2015. He stressed, however, that this additional capacity had not yet been announced and that styrene operating rates would rise quickly if it did not materialise.
“We do see operating rates increasing in the next few years,” he said. “It takes at least three years to build a new plant so better times are coming for the styrene industry.”
Pugh believes that most of the new capacity will be on-purpose styrene production, rather than, for example, from propylene oxide/styrene monomer (PO/SM).
He also noted that the pipeline of new projects in Asia and the Middle East in the 2013-2015 timeframe is smaller than that of previous periods. Asia is structurally short and the Middle East will remain a primary exporter to the region.
Its main derivatives include polystyrene (PS), acrylonitrile-butadiene-styrene (ABS), expandable polystyrene (EPS), styrene acrylonitrile (SAN) and unsaturated polyester resins (UPR) - used for consumer electronics, packaging, automotive, toys and construction.
The global PS market - where growth is forecast at just 3%/year - faces several challenges. Europe is still struggling with oversupply despite a 25% capacity reduction over the past five to six years. Pugh estimates that 10% (200,000 tonnes/year) of European capacity is currently unused, and he expects that over time there will be more closures for PS.
“Demand for PS in Europe is flat to slowly declining by 1%/year, so there will be pressure on producers going forward,” Pugh said.
Al-Enezi is also predicting more closures in the next couple of years. “Given the financial crisis in Europe, where all PS downstream demand is impacted, we believe about 200,000-300,000 tonnes/year capacity will come down between 2011 and 2013 in Europe.”
He added that some industry consolidation may also occur but not as much as the industry has seen in the past two years.
In addition, there is a further 400,000 tonnes/year of PS capacity coming on-stream in the Middle East and Africa in the first quarter of 2012, which will hit Europe’s export business to Turkey and Africa, as well as domestic demand.
Egyptian Styrenics was due to start trial production at its 200,000 tonne/year PS plant in Alexandria, Egypt, this quarter. Saudi Polymers, a joint venture between Arabian Chevron Phillips Petrochemical and National Petrochemical, was also on track to start up its 200,000 tonne/year PS plant in Al Jubail, Saudi Arabia, early in the fourth quarter 2011.
Referring to the new capacities coming on-stream in both the Middle East and Asia, Al-Enezi commented that these “newcomers” tend to have better economics compared with old units and they may try to sell their output in Europe.
“We may see European PS producers taking protective measures to control imports from other regions,” he said.
Competition from other polymers such as polyethylene terephthalate (PET) and polypropylene (PP), as well as imports of semi finished products from the Middle East, Brazil and Asia, remain a challenge for the PS industry. Al-Enezi said that PET, in particular, was a major threat to PS in single-use packaging.
Styrene is expected to be more balanced in the coming five years although Pugh suggested that managing volatility will be critical for future success. Economies of scale, as well as highly efficient commodity polymer plants are important for a sustainable future in the styrene industry, he added.
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