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Bullish on styrene and benzene

Aromatics, Business, Company Strategy, Innnovation, Markets
By John Richardson on 15-Jul-2011

By Malini Hariharan

Styrene’s addition by the US to a list of ‘anticipated carcinogens’ does not seem to have affected producers demand growth expectations for the product or for its key feedstock benzene.

Speaking at the 5th ICIS Asian Aromatics and Derivatives Conference in Singapore earlier this week, Alexander Farina, Shell Chemical’s general manager for chemicals strategy development, drew out an optimistic picture for both benzene and styrene. (Full speech available here)

Styrene is projected to see global demand growth of 3%/year to 2020 supported by expandable polystyrene (EPS) and its application in the construction sector (average annual growth rate of 8% in Northeast Asia). EPS it offers good insulation properties helping countries achieve their objective of lowering carbon dioxide emissions.

Inter-polymer competition between polystyrene (PS) and polypropylene (PP) is also expected to ease as propylene and PP have been getting more expensive.

On the capacity side, a fall in ethane costs has improved export competitiveness of US styrene producers enabling an improvement in capacity utilization. While global styrene is still long with average industry operating rate at around 86%, the good news is just around the corner. With only 1.0-1.5m tonnes/year of new capacity due in the near future operating rates, said Farina, would swiftly recover in 2011.

Benzene is also expected to benefit from developments in the phenolic chain. Global polycarbonate (PC) demand is growing at 6%/year as its use in automobiles and electronics is being ramped up.

Farina did refer to some of the challenges facing benzene, the first being the slow addition to capacity – only 2%/year as against demand growth of 3%. There has also been a shrinking in on-purpose benzene capacity which now account for just 4% of global capacity, down from 20% before 2005.

This loss of swing capacity has made benzene more volatile with rapid fluctuations in prices with prices rapidly fluctuating to account for movements in crude oil or changes to demand.

Farina emphasised Shell’s strategy of remaining an integrated low-cost aromatics producer. New technologies are being developed to retain this status. This includes a gas-to-aromatics route, he said, without giving further details.

“Gas-to-aromatics could be viable by the end of the decade… It is a strategic fit to our upstream gas business, which is where the growth is,” Farina added.

The only other similar technology is the UOP/BP Cyclar process that makes aromatics from butane and propane. The technology has been implemented by Sabic in Saudi Arabia but the blog has been told that it has not been a commercial success.

Meanwhile, the US styrene industry is preparing for a legal fight to remove the ‘carcinogen’ tag. The US federal health regulators had declared in June that styrene is ‘reasonably anticipated to be a human carcinogen’. Industry groups subsequently went to court to block the listing by asking for a preliminary injunction. They claimed that government researchers had relied on manipulated data and on information that had not been reviewed. But a US court rejected last week a plea for preliminary injunction but has still to consider the request for permanent injunction.