Chemical Profile: Asia styrene

31 January 2014 10:01 Source:ICIS Chemical Business

Pure styrene is a colourless to yellow, oily liquid that evaporates easily and has a sweet smell. Styrene is highly flammable, forms explosive mixtures in air, is dangerous when exposed to flame, heat or oxidants and on decomposition, emits acrid fumes.

Styrene is mainly used in the manufacture of homopolymers and copolymers. These include polystyrene (PS), expandable polystyrene (EPS), styrene copolymers (such as acrylonitrile-butadiene-styrene (ABS) resins, styrene-acrylonitrile (SAN) and styrene-butadiene latexes), styrene-butadiene rubber (SBR) and unsaturated polyester resins.

Demand in the first half of 2014 is expected to remain lacklustre as the downstream styrenic resins sector continued to struggle. The nascent recovery in the US and the eurozone continued to result in weak demand for Asia made goods. Consequently, consumption of resins such as PS and ABS is expected to show limited improvement. With Asia markets closed for the Lunar New Year holidays in late January and early February, the resins trade is expected to stay slow until at least the second quarter. Hence, demand for styrene will likely stay weak as a result. However, with several regional facilities slated for maintenance from February to April, availability of SM is likely to be constrained in the first half of the year. At the same time, no new capacity has been slated to come onstream until the end of the year. Most new capacities that have been planned for are in 2015 and 2016.

Prices have been drifting lower in January as market activity slowed ahead of the Lunar New Year holidays. A number of players decided to book profits rather than take a chance with the market, post holidays. Prices of SM slipped below $1,700/tonne CFR China in January. Weak performance in the feedstock sectors weighed on SM values. Benzene prices declined below $1,350/tonne FOB Korea while ethylene values fell to the below $1,500/tonne CFR NE Asia.

However, with regional maintenance shutdowns mean that market participants expect prices to stay buoyant after the holidays. However, it remains to be seen if prices can recapture the highs achieved in the second half of last year. Prices were at record levels of above $1,800/tonne in July and the first half of August of 2013 and again in the first half of September on tight supply and a steady draw down in inventories in eastern China. The lull season in the fourth quarter saw prices slipping to below $1,750/tonne in late 2013.

Meanwhile, the Purchasing Managers’ Index showed a slowdown in China factory activity in January, further dampening sentiment. Consequently, SM prices came under more downward pressure and drifted lower.

A build up in eastern China shore tank inventories this week did not support SM prices. Inventories were estimated at 67,400 tonnes, up from 54,700 tonnes earlier in January. Domestic prices weakened to below yuan (CNY) 11,750/tonne ex-tank in late January amid subdued trade.

Styrene is produced predominately by ethylbenzene (EB)-based technology. EB is first made by the catalytic alkylation of benzene with ethylene and then dehydrogenated to styrene. The coproduction of styrene with propylene oxide (PO) by the PO/SM process had been gaining popularity.

Asia SM growth is expected to be in the low-to-mid single digits over the next several years. Key downstream market like polystyrene and expandable polystyrene continue to face headwinds as some end-products are increasingly being substituted with other plastics.

Outside of China, few capacities increases are planned for styrene. In fact, there has been some closure of plants in recent years. Most notably, Mitsubishi Chemical closed its 371,000 tonne/year plant in Kashima in 2011. Denka closed its 240,000 tonne/year SM unit in Chiba in 2012. In 2015, Nihon Oxirane plans to shut its 425,000 tonne/year SM unit at Chiba permanently.

Bucking the trend outside China, SK Chemicals plans to start-up its 350,000 tonne/year SM plant in the middle of this year or in the third quarter. The facility has been idled over the past five years. All additional capacities are coming up in China but mostly are scheduled for 2015 and 2016.

By Clive Ong