New SM Capacity Aims at Chinese Marketplace

Guan Ying   

Global capacity increases rapidly

Pulled by the rapidly increasing demand of styrene monomer (SM) downstream products such as polystyrene (PS), styrene-butadiene-styrene (SBS) and acrylonitrile – butadiene - styrene (ABS) resins, the global SM capacity has been increasing rapidly in recent years, in particular, the increase rate of the capacity in Asia is obviously higher than that of other regions in the world.

There exists a large supply deficit in local marketplace

China's SM production has been able to step into a new stage for two major reasons. One is that the demand from local marketplace has risen sharply, and the other is that multinational oil companies have been moving their investments to Asia. In June 2005, Shanghai Secco Petrochemical's 500 thousand t/a SM unit put into production successfully, representing that China's SM production reached world-class scale. In 2005, China had 15 SM units with a capacity of over 50 thousand t/a, the number increased by 3 compared with 2004, and the total capacity of SM in China reached 2.055 million t/a. Except the 500 thousand t/a SM unit of Shanghai Secco Petrochemical, the newly increased capacity also includes Changzhou Dohow Chemical's newly built 150 thousand t/a unit that started commercial operation in November 2005, CNPC Jinxi Refining & Chemical's new 60 thousand t/a unit that completed construction at the end of 2005 and put into normal production in March 2006 and it takes the benzene produced by Jinxi Petrochemical Company as the raw materials, and the newly expanded 35 thousand t/a of Daqing Petrochemical. Besides, Jiangsu Shuangliang Group's 200 thousand t/a SM unit go on smoothly, and according to the schedule, the SM unit is expected to put on stream in around mid-May 2006.     Supply deficit has always been the major contradiction of China's SM market in recent years. Although China's SM production has developed rapidly in recent two years, the supply still cannot satisfy the increasingly hiking demand, and there still exists a rather large supply deficit. Presently, the output of China's SM end products such as TV, refrigerator and air-conditioner rank the leading position in the world. Adding the increasing demand of other sectors (such as automobile, architecture, etc.), China's SM sector has developed rapidly and China becomes the country with the fastest increase rate of SM demand. Although China's total SM capacity jumped to 2.055 million t/a in 2005, due to the newly built units putting into operation rather late and low operating rate, effective mass supply was not formed in 2005. China's total output of SM in 2005 was around 1.25 million tons, which didn't radically change the situation of supply deficit in domestic market and the import amount of SM only decreased by 77 thousand tons compared with 2004.

The market price slid down with fluctuation

China's SM price presented the trend of drop with fluctuation in 2005. The highest price reached RMB12 600 /t and the lowest reached RMB8 500 /t. It hovered around RMB10 000 /t for a rather long time, and the average price was around RMB10 550 /t. Compared with 2004, the highest price dropped by RMB2 600 /t, the average price decreased by RMB890 /t, the lowest price increased by RMB820 /t, with relatively big rollback in a whole.     The major reasons for the price drop of SM in China are as follows: first of all, the global SM supply is in surplus, while Asia was the target market of large scale SM capacity expansion in North America, therefore China's SM market was seriously affected. Secondly, most of China's SM capacity did not integrate with its downstream derivative units, therefore let most of newly increased output of SM directly enter into the domestic market. Thirdly, although the demand for major SM downstream products such as PS and ABS had been increasing continuously, the global SM market was in oversupply and the demand tended to slow down, therefore the SM consumption was suppressed. Fourthly, oil price hike led to the price rise of raw materials such as benzene and ethylene, therefore resulted in weak SM market.

PS is the largest consumption sector

In view of market consumption distribution, the global SM in 2005 was still mainly used in the production of PS, ABS/styrene-acrylonitrile copolymer (SAN), styrene-butadiene-rubber (SBR)/SBR latex, unsaturated polyester resin and styrene series thermoplastic elastomers. The consumption distribution of SM in China is different from that in foreign countries, with larger consumption proportion of styrene series thermoplastic elastomers, pesticide and ion exchange resins, etc.    PS is the most important SM derivative in China, and also the largest consumption sector of SM.  PS industrial products include general-purpose polystyrene (GPPS), expandible polystyrene (EPS) and high impact polystyrene (HIPS), etc. Although global market is still in oversupply, the demand increase of PS in China largely exceeds that in other countries and regions. There exists rather great difference in PS consumption distribution in the world. In Northeast Asia, around 50% of PS is used in producing electronic products and appliances, with only 20% used in producing disposable packaging materials. But in North America, only 9% of PS is used in producing electronic products and appliances, while 58% is used in producing disposable packaging materials.    ABS/SAN resin is the second largest SM derivative only next to PS. China's ABS resin end products are mainly used in electron/ electric appliance sector. For example, the total consumption of ABS in refrigerator, TV, washer, telephone, office equipment and other small household appliance accounts for around 80% of the total, and the consumption in toys, automobile fittings accounts for around 10%. The consumption distribution of ABS resin in China is changing gradually, and the consumption is moving towards industries such as automobile and electronics. The consumption proportion in household appliance presents the trend of gradual declining. The reason is that household appliance such as TV and washer in China is already in the status of oversupply. Adding the continuous application of the substitutes such as modified polypropylene, the consumption of ABS resin in large household appliance sector is decreasing, while the applications of ABS in the sectors such as small household appliances, office equipment and transportation are expanding quietly. The large scale expansion of the production and consumption in automobile and motorcycle will make automobile interior decorating products the new consumption spotlight of ABS resin market, and the rise of leisure products such as yacht and mobile house has also opened up a new market for ABS resin. Besides, there also exists a promising market prospect for ABS in the applications of architecture materials such as tube and pipe fittings, medical instrument and alloy blends, etc.   The consumptions of the major SM downstream products such as SBR/SBR latex, unsaturated polyester resin, styrene series thermoplastic elastomers, pesticide, pharmaceutical and ion exchange resin will change along with the adjustments of their market distribution. For example, China will reduced the proportion of SBR in synthetic rubber in order to control the large scale development of SBR, therefore the consumption of SM in SBR industry will present the trend of decrease.

Supply deficit will be greatly narrowed

Many newly built or expanded SM units in the world will put into operation before 2007, and the global capacity of SM will exceed 30 million t/a at that time. The capacity growth of SM in the world will be much higher than the demand growth befo