27 December 2011 21:30 [Source: ICIS news]
By Brian Balboa
HOUSTON (ICIS)--The global economic uncertainty that has developed in 2011 is causing mixed outlooks from North American styrene players.
Producers are staying mostly optimistic, while some market participants are taking a cautious approach to 2012.
Either way, the eurozone debt crisis and the recent lack of confidence in the US economy is affecting styrene producers' and consumers' forecasts for the next 12 months.
That outlook is a far cry from a year earlier, when producers and consumers alike said they expected 2011 to be business as usual, citing a strong cost advantage for raw materials such as natural gas.
Two other factors that will impact the styrene market besides the global economic uncertainty are the feedstock benzene and crude oil markets.
Market participants said they expect a volatile benzene market. One consumer also acknowledged potential volatility from feedstocks, citing expectations of a cautious market.
“My forecast is that there will be reduced buying,” one North American styrene consumer said. “They [the market] will buy the absolute minimum. So buyers will be [sensitive] to building up inventories, because the market will be watching inventories even closer.”
The consumer said North American styrene growth would depend on the US economy.
“If we can’t address the debt issues in the US, then there will be lesser growth,” the buyer said. “Unemployment numbers will not improve. Mortgage, housing and construction growth will be subdued.”
Not all styrene players expect to see a cautious market, however.
Martin Pugh, Europe president for Styrolution, said in November at the 10th European Aromatics & Derivatives Conference in Amsterdam that the global styrene market will see improved stability in the next few years as operating rates increase.
He said demand growth will start to overtake capacity additions in the next three years, which will lead to operating rates gradually moving back towards 90% from the 80% level seen since the downturn in late 2008.
However, he acknowledged that the styrene market still faces crucial challenges in light of continuing economic volatility.
Other North American styrene producers also acknowledged the global economic picture.
“The EU debt will be on everyone’s mind,” one said. “Our forecast for 2012 includes some measure of that.”
The supplier also said it expects the arbitrage window between North America and Europe to be closed a little more than usual during 2012, which would limit trading between the two regions. Despite that, the producer noted that the North American styrene market was more optimistic.
Producers said North America still has a strong cost advantage for raw materials such as natural gas. In addition, suppliers and consumers alike said they expect styrene demand to improve, specifically downstream in the automotive and styrene butadiene rubber (SBR) markets, citing recent tyre manufacturing expansions.
Another issue many market participants will be focusing on in 2012 is styrene's carcinogenic status.
Earlier this year, the US Department of Health and Human Services’s National Toxicology Program issued its 12th report on carcinogens, in which styrene was characterised as “reasonably anticipated” to be a human carcinogen.
US styrene producers and consumers have already called on the White House for an objective scientific review of the listing.
Overall, US styrene producers so far have said they do not see any major threats from the carcinogenic label except within the disposable packaging sector.
“We [the industry] have always handled styrene as a hazardous material,” a supplier said, citing the day-to-day operations of styrene's production.
For more on styrene visit ICIS chemical intelligence
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