OUTLOOK ’18: Chinese SM imports may fall if ADD is imposed in 2018

21 December 2017 06:16 Source:ICIS News

SINGAPORE (ICIS)--Chinese importers will likely reduce purchasing volumes in 2018 if the government decides to impose anti-dumping duties on styrene monomer (SM) imports from Korea, Taiwan and the US.

The Ministry of Commerce (MOC) announced to launch a year-long anti-dumping probe into SM imported from South Korea, Taiwan and the US on 23 June 2017, and is likely to take preliminary measures in February 2018.

Out of the approximate 3.5m tonnes of SM imported by China in 2016, around 2.11m tonnes, or 60% alone was from the US, South Korea and Taiwan, according to the data from China Customs.

China’s 2016 domestic SM output was around 6.24m tonnes in 2016, accounting for 64.1% of the total supply, according to ICIS data.

Therefore, some market participants believe that it would have a large impact on domestic SM market once the Chinese authorities confirm the dumping duty.

However, some market players believe the impact on the market would weaken gradually because the import volumes had already begun to decline as a result of China’s own capacity increase.

The data obtained from China Customs shows that the upward momentum of China’s SM import volumes slowed down in 2016 after the year-on-year rises before 2015.

The import volumes in the first 10 months of 2017 fell by 14% year on year to around 2.53m tonnes.

The import volumes might first decline in 2017, and the downward trend will extend into the coming years.

Moreover, some market players believe the decline would accelerate further if the investigators confirm the three origins are indeed dumping SM into China.

Some domestic importers are considering increasing contract volumes of domestic cargoes in 2018.

Domestic SM production has been increasing in recent years. The production during January-September 2017 increased by around 600,000 tonnes (14%) year on year to 4.94m tonnes, according to ICIS data.

Domestic producers plan to increase SM capacity by 765,000 tonnes in 2017. Of those, 230,000 tonnes of capacity has been put into commercial production.

Company Capacity (’000 tonnes)
Jiangxi Jiujiang PC 80
Ningbo Keyuan PC 150
Zhenghai Refinery 35
Qingdao Soda Ash 500

The margins of domestic integrated SM plants averaged yuan (CNY) 720/tonne in the first three quarters of 2017, up by CNY110/tonne (18%) year on year, according to ICIS data.

Therefore, the average operating rate of domestic SM sector during the period increased to around 77.9% from nearly 70.5% in the same period of the previous year.

High margins stimulated market participants’ investment. ICIS expects there will be a total of 2.18m tonnes of new capacity in 2018.

In addition, downstream demand is also expected to support high operating rates of SM producers in 2018.

ICIS data shows that the margins of acrylonitrile butadiene styrene (ABS), expanded polystyrene (EPS) and polystyrene (PS) - the three largest downstream products of SM - in the first three quarters of 2017 increased significantly from the same period of 2016.

The gross margins of domestic ABS producers averaged as high as CNY2,559/tonne during the period, which increased by nearly 27 times year on year .

ICIS expects domestic producers will start up around 280,000 tonne/year ABS plants before end 2017 and 450,000 tonne/year in 2018.

There will not be a severe oversupply in domestic SM market due to increasing downstream demand and decreasing import volumes, which will lay a foundation for high run rates of domestic SM plants in 2018 to some extent.

Company Capacity (’000 tonnes/year)
Anhui Haoyuan PC 260
Dalian Hengli PC 720
Rongsheng Refinery 1,200

Outlook article by Joanne Wang and Tina Zhang

By Joanne Wang