Europe benzene, styrene supply to stay long on increased Asian capacities

Author: Helena Strathearn


LONDON (ICIS)--Benzene and styrene availability in Europe for the remainder of 2019 will most likely be long, and that length is set to prevail into 2020 on the back of increased Asian capacity.

Programme to improve energy efficiency of homes, Llanelli, Wales, Britain - 03 Feb 2015Benzene and styrene are each coming out of the peak turnaround season, set to conclude by the end of June and which went according to plan, leaving little impact in the markets.

There was a massive inventory built-up in preparation for the outages, which caused styrene prices to rise from November to April.

Inventories are now being drawn down.

Benzene prices have been following the US’ global pricing lead and look set to continue that trend for now.

Europe is trading at just below a workable arbitrage to the US. While Europe was the highest-priced region for a long while, it is now second, with Asia third.

Trade is expected to continue being thin in a long market for both products, with business increasingly being done on a contractual basis to limit risks.

Crude oil prices, as ever, are a factor to watch. The recent attacks on tankers in the key oil-producing region of the Gulf of Oman could cause disruption to logistics and freight rates.

Trade talks between the US and China's Presidents Donald Trump and Xi Jinping planned at the G20 summit at the end of June could impact prices.

Length in the global benzene market has been exacerbated by the start-up of on-spec production at Hengli Petrochemical’s 970,000 tonne/year benzene plant in April. The plant is based in Dalian, China.

Output is slated for the merchant market, as the plant’s 720,000 tonne/year downstream styrene unit might not start up in 2019.

European styrene prices have made recent gains on the back of a firmer prompt market in Asia, despite domestic length and weak derivative demand in a buyers' market.

Inventories in east China have fallen recently to the lowest level recorded so far in 2019.

The Asian market could tighten as South Korea's Hanwha Total is now expected to restart later than expected, in early July, and with normal production set for mid-July.

Around 150,000 tonnes of styrene arrived in Europe between April and June from the US and the Middle East to compensate for lost volumes during the spring maintenance period.

Company Location Capacity tonnes/year Start date End date
Synthos Kralupy, Czech Republic 170,000 March / April April / May
Shell Moerdijk, Netherlands 450,000 Late April / early May H1 July
Trinseo Bohlen, Germany 330,000 Early May June
LyondellBasell / Covestro Maasvlakte, Netherlands 680,000 mid-September mid-November

Up to 20,000 tonnes in exports might leave Europe for Asia – namely India and Korea – in the coming weeks, but domestic supply will remain long.

As demand looks stable, at best, there is no likely home for excess volumes.

Derivative demand is under pressure because of macroeconomic uncertainty, and that has reduced performance in end markets like automotive and other key manufacturing industries.

Demand is weak across derivatives like acrylonitrile butadiene styrene (ABS), high impact polystyrene (HIPS) and expandable polystyrene (EPS).

Some of the uncertainties that are causing reticence are stemming from geopolitical issues.

Global trade has had to adapt to anti-dumping measures, work around the intensified US-China trade war, and deal with protracted Brexit discussions.

General macroeconomic malaise has led to revised expandable polystyrene (EPS) forecasts, and suggestions that macroeconomics could dictate reduced run rates at styrene plants in some parts of the world.

Global styrene capacity is expected to grow at a remarkable rate over the next five years, with estimates of more than 5m tonnes/year on top of current capacity.

A number of plants are due to come online, predominantly in Asia, and most in China.

A couple of the largest plants planned are the Zhejiang Petrochemicals facility and Hengli Petrochemical.

There are turnarounds planned for the third quarter in Europe, but Asian supply will lengthen once plants there restart.

If everything plays out as it appears at present, the market will stay long and most likely lengthen.

Benzene is used to produce a number of intermediates that are used to create polymers, solvents and detergents.

Styrene is a chemical used to make latex and polystyrene resins, which in turn are used to make plastic packaging, disposable cups and insulation.

Pictured: EPS insulation being fitted to a wall house in the UK; European demand for the styrene downstream product is weak
Source: Graham Harries/Shutterstock 

Focus article by Helena Strathearn

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