Styrene: Supply And Demand Change

Supply and demand imbalance in Asian markets

It is reported that due to the successive commissioning of several new styrene production capacity projects in China, it is expected that by the first quarter of 2022, there will be a large surplus of styrene in China. Market participants said this could be the inevitable beginning of China's transition from a styrene importer to an exporter. As Chinese import demand shrinks, international styrene sellers are looking for other customers, especially in Southeast Asia and India. Expectations of erratic U.S. supplies also have eyes on Europe. These new integrated upstream and downstream styrene production facilities in China are more efficient and have lower operating costs, giving them an advantage over non-integrated producers. Integrated producers of imported crude oil and liquefied petroleum gas (LPG) have an even stronger advantage in the first quarter of 2022 as inland port logistics problems persist.

In India, demand remains subdued until the end of January 2022. While demand for styrene in India is expected to start recovering after January, stronger consumption may have to wait until May, market sources said. From March 2022, the Indian government will once again extend the implementation of mandatory quality certification for styrene imports. Some international suppliers are already registered with the Bureau of Indian Standards (BIS) for certification, but the completion process may take longer.

The downstream ABS and polystyrene (PS) markets are likely to remain weak in the first half of 2022 due to rising upstream styrene supply and uncertain end-user demand, market players said. Market players are paying attention to the inventory needs of end-users such as the home appliance and automotive industries, especially exporters. It ultimately depends on the global economic recovery and the availability of container ships.

US market demand will strengthen

Styrene demand in the US domestic and export markets will rebound in the first half of 2022 after a weaker market in December 2021, as buyers look to rebuild following a decline in US styrene load rates since Hurricane Ida made landfall on August 29 in stock.

A trader said that in December 2021, merchants worked hard to reduce inventories, and styrene demand remained seasonally slow in the fourth quarter of 2021. A buyer said the demand recovery in early 2022 was further advanced, with a seasonal replenishment in January. A benzene seller added that downstream styrene demand recovers after multiple plant shutdowns in 2021, and the market remains relatively optimistic. However, the Omicron variant that appeared at the end of November 2021 has a significant impact on the market.

According to global Platts data, from October 7 to November 9, 2021, the styrene production load rate in North America was 70% to 76%. The industry-wide average load factor is usually 85%. Based on this, U.S. styrene production in September 2021 is estimated to decrease by 65,000 tons. From February to April 2022, three sets of styrene plants in the United States are planned to be overhauled, which will also support the rebound of styrene prices in the first quarter of 2022. From February to April 2022, the upcoming shutdown in the United States will lead to a reduction in styrene production of 128,000 tons, with an average load rate of 85%. Total North American styrene production is estimated at 5.8 million tonnes/year. U.S. downstream polystyrene demand is expected to remain strong in the first half of 2022, although prices are expected to gradually ease.

Market participants said the U.S. styrene and polystyrene chain market could easily spiral out of control as a planned overhaul or any unexpected force majeure event would result in a brief price hike.

European stocks to rebuild

In Europe, styrene monomer inventories are set to recover following a massive production outage in the fourth quarter of 2021. In November 2021, the profit margin of European styrene relative to raw material benzene was higher, and the price difference for the month exceeded US$500/ton. In a balanced market, the spread is usually $250/ton, the sources said.

Higher winter energy prices in Europe could also support wider spreads due to gas shortages. With gas shortages expected to continue into 2022 in Europe, producers of styrene and downstream styrene polymers are preparing to impose surcharges on monthly settlement contract prices. Rising energy prices have also completely upended annual contract discussions for 2022, with many buyers already backing down.

In the downstream ABS market, high freight rates and unreliable delivery dates continue to keep prices high despite expected imports from Asia. Intra-European supply recovery is likely to start in early 2022, including the addition of 50,000 t/y of Ineos Styrolution's French plant and 30,000 t/y of Versalis' Italian plant.

The direction of the polystyrene market is also uncertain this year, and buyers' restocking activity will be influenced by producers' precise supply allocations. At the end of 2021, the European market has almost no spot supply, and imports are affected by high freight rates, which is expected to continue.