New Changes in Styrene Downstream Market Opportunities   

By Zhang Li  China National Petroleum and Chemical Planning Institute

Supply shortage of styrene will continue for many years

Styrene monomer is an important raw material for the synthesis of polymers and also a basic product in the petroleum and chemical industry. Styrene produced by Chinese enterprises today is basically for their own consumption, with only small amounts sold as a commodity. Owing to the sustained brisk increase of demand and the huge market gap, various large styrene producers have expanded capacity. Several new styrene units started production in China in 2009. The total styrene capacity had already reached 4.10 million t/a at the end of 2009 and the output was 2.80 million tons. With the completion of the 500 000 t/a styrene unit in Tianjin Dagu Chemical Co., Ltd. and the PO/SM unit (the capacity of styrene being 620 000 t/a) in Ningbo Zhenhai Refining and Chemical Co., Ltd. LiAnde Chemical Co., Ltd., the styrene capacity in China further increased to 5.22 million t/a in November 2010, accounting for around 15% of the world total.
   The styrene capacity in the international market has some surplus, but the output in China still falls far short of the market demand. The output, the consumption and the imported amount of styrene in China have all been increasing significantly, the self-sufficiency rate is maintained at around 40% and the market gap is widening. With the implementation of various supportive policies, producers of styrene downstream products such as PS, ABS and SBR shook off the difficult situation caused by the financial crisis in 2009 and increased the consumption demand of styrene. The apparent consumption of styrene in China reached 6.438 million tons in 2009, the import amount was 3.645 million tons and the import dependence was around 57%.
   It is expected that the demand for styrene derivatives in the domestic market will still  increase rapidly in the next few years. Sectors with a rapid demand increase will mainly be the SBR, SBCs and ABS/SAN resin sectors. It is expected that the apparent consumption of styrene in China will reach 6.50 million tons in 2010 and 9.00 million tons in 2015. In terms of supply/demand balance, the average annual net amount of styrene imported into the domestic market will be maintained at 2.00-3.00 million tons in the next few years.

Market opportunities of downstream products will be different

(1) GPPS/HIPS: cautious optimism

Polystyrene is one of the five main kinds of general-purpose synthetic resins. Its output and consumption are exceeded only by PE, PVC and PP. Polystyrene is classified into three varieties – GPPS, HIPS and EPS. GPPS can have different molding methods such as injection, extrusion, blowing and foaming and is especially suitable for injection molding and extrusion molding. It can be used to make office appliances, daily utensils, packaging materials, chemical containers, magnetic tapes and compact discs. HIPS can be molded into various products through injection and extrusion. It is used to make electric components, equipment casings, instrument parts, refrigerator liners, sheets, furniture, toys, stationery and packages. Some high-performance products made of HIPS have already partially replaced engineering plastics with relatively high price such as ABS. Table 1 shows an analysis of investment opportunities in styrene downstream products.
   The global capacity to make GPPS and HIPS is around 15.00 million t/a today and nearly 4.00 t/a is in surplus. Due to the constant innovation of technologies for end-use products in foreign countries, polystyrene is faced with impacts from other polyolefin products in recent years. Some regional producers have already totally quit the polystyrene resin manufacturing business. For example, since 2007 BASF, Idemitsu Kosan Malaysia Co., Ltd., Dow Chemical (the eastern region of China), Mitsui Chemical and Sumitomo Chemical have shut down some polystyrene units and gradually quit that market.
   The capacity of GPPS/HIPS in China was 2.42 million t/a in 2009. There are around 20 producers and most of them use technologies introduced from abroad. Around a half of polystyrene units have small scale and outdated technology. The supply of raw materials can not be guaranteed and the quality of products is poor. The average operating rate is less than 60% in recent years. The output was around 1.42 million tons in 2009, the import volume was 1.066 million tons, the apparent consumption was 2.46 million tons and the self-sufficiency rate was around 58%. The electronic/electric sector is the major consumption sector and the major variety used is HIPS. The market share ratio between GPPS and HIPS is around 55:45 today. With the rapid demand growth in the electronic/electric sector, the market share of HIPS will increase rapidly. Due to the structural adjustment and upgrading of traditional electronics/electrics, the global financial crisis and the growth slowdown of the world economy, however, the average annual growth of the GPPS/HIPS demand in China is expected to be reduced to around 4% in the next few years. The consumption in the domestic market will reach 3.10 million tons in 2015 and the market gap will be around 900 000 tons (based on an operating rate of 70%) at that time.

(2) EPS: serious surplus

Major consumption sectors of EPS in China include packaging materials (cushion materials for household electric appliances and electronics, accounting for 54% of the total consumption) and thermal insulating materials for construction (accounting for 40% of the total consumption). Small amounts are also used in disposable tableware (accounting for 2% of the total consumption). The capacity of EPS in China was around 3.50 million t/a in 2009. There are more than 20 major producers and also a dozen small producers with a total capacity of around 400 000 t/a. As a result of various factors such as inadequate raw material supply, poor competitiveness and environmental protection, small producers are in a state of production suspension in recent years. The output of EPS in China was around 1.90 million tons in 2009 and the apparent consumption was 1.72 million tons.
   As EPS has relatively low market entry threshold, the speed for the construction of new units is unduly quick. The capacity has therefore made a concentrated release in recent years and there is a serious oversupply in the market. Starting from 2006 China became a net exporter of EPS. It is expected that the apparent demand of EPS in China will be around 2.45 million tons in 2015. Around 30% of the capacity will be idle at that time.

(3) ABS: need of vigorous development

ABS is one of the 5 main kinds of synthetic resins and is also called quasi-engineering plastic. Its application sectors have been extended to various aspects of industry and daily life. It is mainly used in various electronics/electrics, automobiles components and tools. The total capacity of ABS in China was 2.13 million t/a in 2009. There are more than 10 producers. They all use production technologies from abroad, the concentration degree is high and the market competitiveness is strong. The output of ABS in China was around 1.621 million tons in 2009, the apparent consumption was 3.483 million tons and the import dependence was around 53%.
   The consumption of ABS in China today is still highly concentrated in making components of electronics/electrics such as refrigerators, television sets, office equipment and other small household electric appliances. The consumption in the electronic/electric sector accounts for around 80% of the total. The consumption proportion is around 12% for light industry products such as to