Asia chemical profile: Styrene

20 February 2012 00:00  [Source: ICB]

USES

Asia StyreneStyrene monomer (SM) is mainly used to manufacture homopolymers and copolymers, including polystyrene (PS), expandable polystyrene (EPS), styrene copolymers, styrene-butadiene rubber (SBR) and unsaturated polyester resins.

SUPPLY/DEMAND

Demand for SM was lackluster in late 2011, amid the year-end lull. Lower operating rates at Chinese downstream plants of 60-70% reduced demand for the monomer.

While there were few plant turnarounds in November and December, SM supply was still constrained as producers lowered output due to unfavorable margins. High feedstock benzene and ethylene prices have eroded margins of SM makers.

Japanese producers, in particular, faced considerable difficulty in exporting SM given the strong yen. Few arbitrage cargoes from the US were seen headed to Asia since November 2011 as volatile prices and heightened freight costs discouraged traders.

PRICES

While demand has been lackluster since November 2011, SM prices have remained on an uptrend. Buoyant energy futures and strong performance in the feedstock benzene sector gave SM prices the impetus to increase.

Spot prices into the key China market rose above $1,450/tonne CFR China in mid ­January from $1,275/tonne CFR China in mid-October 2011, as assessed by ICIS.

Speculation among traders that demand for SM would likely improve after the Lunar New Year holiday in late January also contributed to the price increase.

Typically, buying momentum for styrenic resins would pick up after the Lunar New Year as end-users replenish stocks ahead of the peak season which starts in April. Hence, demand for SM was expected to rebound in tandem, prompting traders to pick up parcels in January.

With the holiday now over, market players across Asia have returned to the market but demand for resins and SM in the key Chinese market have not picked up as expected. Prices are fluctuating between $1,400-1,450/tonne CFR China while players are adopting a cautious stance because of the lack of definitive price direction.

TECHNOLOGY

Styrene is predominantly produced via ethylbenzene (EB)-based technology. It is also made as a co-product with propylene oxide (PO). Approximately 20% of styrene production is based on the latter process.

OUTLOOK

The market is expected to be volatile going forward as two opposing forces are in play. On the one hand, supply in the region is expected to tighten further as several lines are scheduled for turnarounds in March and April. The lines include those of Asahi Kasei and Idemitsu Kosan in Japan and Samsung Total Petrochemicals in South Korea.

With plants in Asia trimming back output slightly on the back of slim margins, availability in the near term looks likely to be reduced further. The lack of US-Asia arbitrage in recent months also suggests that the tight availability in the region is unlikely to be alleviated anytime soon. On the demand side, SM consumption from downstream PS and acrylonitrile butadiene styrene (ABS) sectors remains weak after the Lunar New Year holidays. Concerns over the eurozone debt crisis and weak economic conditions in the US dampening demand for Asian made products have curbed demand for styrenics resins. Consequently, the stockpile of SM in east China has risen above 150,000 tonnes in early February, from just above 100,000 tonnes in mid January.


Author: Clive Ong and Feliza Mirasol



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