In the next 5 years, China's styrene self-sufficiency rate will exceed 95%

Driven by a significant increase in production capacity, China's styrene self-sufficiency rate will exceed 95% in the next five years, thereby effectively reducing China's styrene imports. A few days ago, Brian Lee, executive director of IHS Markit Asian Aromatic Hydrocarbons, said that in the context of the slowdown in world economic growth and the decline in Chinese imports, a large number of new production capacity in China will be put into production one after another, and the global styrene market will also face fierce market entry competition The profitability of production equipment may be questioned, and triggers a gradual reorganization of the styrene industry.

Brian Lee said that China's styrene imports have been gradually declining over the past five years. As new production capacity is put into operation one after another, it is expected that China's imports will fall below 1.5 million tons / year. With the decline in imports, China's styrene will also have a considerable amount of exports. Although North America and the Middle East will still be the main sources of styrene exports, as China's import demand shrinks, the future global styrene export market will become more competitive. With the decline in China's styrene imports, it is expected that by 2024, the global styrene trade will account for 22% of styrene production from 27% in 2019.

In the next five years, styrene capacity will expand significantly. IHS Markit said that this year two sets of styrene plants with a capacity of 2 million tons / year have been put into operation, and another set of 1.5 million tons / year styrene plant will be put into operation in the second half of 2020.

Over the past 10 years, the increase in styrene capacity has ensured a simultaneous increase in supply and demand. However, in China, due to the acceleration of the construction of new installations, the start date has been advanced to 2020-2021. In 2018, market participants had expected these new production capacities to be put into operation in 2021-2022. Especially when the current global spread of the new crown epidemic has caused a slowdown in global economic growth, these new production capacity will continue to be put into operation one after another. The rapid increase in new production capacity will inevitably have an impact on global trade and industry profitability.

IHS Markit predicts that the demand for styrene will shrink in synchronization with global GDP in 2020. Before the outbreak of the new crown epidemic, the agency expected global GDP to grow by 2.4% in 2020 and styrene demand growth to be about 1.8%, with a similar growth rate in 2021. Based on the current and confirmed assumptions of added value of production capacity in China and other countries, the global styrene balance will maintain a state of oversupply in the next few years.

Oversupply and weak demand will exacerbate concerns about the profitability of certain styrene assets. Brian Lee said: "Western Europe has the highest production cost of styrene. Considering the demand growth trend, the risk of styrene asset restructuring in Western Europe will continue to increase. In addition, non-upstream and downstream integration, small-scale Chinese styrene assets are also facing risk."

"Before this naphtha price plunge, China ’s non-upstream and downstream integrated petrochemical producers’ profit margins were higher than integrated producers ’profit margins due to the low ethylene price relative to naphtha prices. From a perspective, the profitability of small-scale equipment and non-integrated producers is not as high as that of large-scale integrated producers. "Brian Lee said.