By Cui Jing, JLC Chemical
In recent years, with the continuous capacity expansion of China's styrene industry, its overall distribution has undergone obvious changes. Among them, East China, the largest production area in China, has suffered production capacity decline, sliding from a proportion of 45% in 2020 to the current 39%, despite Zhejiang Petrochemical Co., Ltd., Ningbo Huatai Wealthy Polymer Material Co., Ltd., Anhui Jiaxi New Materials Technology Co., Ltd., and Ningbo ZRCC Lyondell Chemical Co., Ltd. Phase II have been put into production successively. While North China has rapidly increased from a proportion of 21% in 2020 to the current 26%, becoming the second largest production area in China, which thanks to the centralized production and release of Tangshan Risun Chemical Co., Ltd., YantaiWanhua Chemical Group Co., Ltd., Tianjin Bohua Chemical Development Co., Ltd., and Shandong Lihuayi Group Co., Ltd. Phase II (see Figure 1). South China, with the successive commissioning of CNOOC and Shell Petrochemicals Co., Ltd. Phase II, Fujian Gulei Petrochemical Co., Ltd., Sinochem Quanzhou Petrochemical Co., Ltd. and Maoming Petrochemical Co., Ltd. Phase II, also sees a rapid development in production capacity, from a proportion of 10% in 2020 to the current 19%. Northeast China has seen no new growth in the past two years, after the commissioning of Hengli Petrochemical Co., Ltd. and Bora LyondellBasell Petrochemical Co., Ltd. in 2020, therefore, its proportion has shrunk significantly.
Figure 1 Distribution of styrene production capacity in China in 2020 and 2022
Technology and scale
In 2020, projects adopted PO/SM technology accounted for only 11% in China. While in recent years, the number of new commissioning projects with PO/SM technology has increased significantly, and its proportion has surged to 24%. From the perspective of the production scale, the proportion of enterprises with an annual production capacity exceeding 400 000 tons in 2020 was 52%. Since the new projects in recent years are mainly medium and largescale, the proportion of enterprises with an annual production capacity exceeding 400 000 tons has risen to 65% at present. (see Figure 2).
Figure 2 Changes in the proportion of styrene enterpriseswith an production capacity exceeding 400 000 t/a
It can be seen from Figure 3 that the main port inventory in East China has changed significantly from 2021 to 2022, and the absolute value of the year has dropped significantly. The main reasons lie in: first, the frequent reduction and shutdown of international units have led to a sharp reduction in imports; Second, the surge of export volume has effectively eased the pressure on domestic supply; Third, the domestic styrene industry has maintained a relatively low operating rate for a long time.
Figure 3 Comparison of styrene inventory trends in East China from 2020 to 2022
In addition, judging from the market performance of the styrene in the past two years, the guiding force of the terminal inventory data has weakened. While the domestic macro policies, the resonance guidance brought by energy and chemical products, and the upstream cost have significantly increasing driving force for styrene.
In the past two years, the production profits of styrene enterprises have continued to be squeezed, and the industry is no longer as highly profitable as in the early stage, but hovers around the profit and loss line and becomes the norm (see Figure 4). The reasons are: first, the concentrated release of China's styrene production capacity in recent years has led to a qualitative change in the supply and demand pattern, gradually shifting from seller's market to buyer's market; Second, high cost has continued to squeeze the profit. The sharp narrowing of the price difference between pure benzene and styrene in recent two years can also confirm this reason from another side. From the perspective of the price evaluation, the price difference between the two products in previous years was mostly maintained at RMB2 000-2 500 per ton, but it narrowed to RMB1 000-1 500 per ton in the past two years, and even only around RMB200-500 per ton for a short time.
Figure 4 Comparison of theoretical profit and loss trends of styrene in 2020-2022
Import and export
In recent years, styrene shows a trend of sharp plunge in imports and tremendous increase in exports (see Figure 5). The reason is that China's styrene supply and demand pattern has undergone a qualitative change. The production capacity of domestic styrene has increased sharply, however, the capacity expansion in downstream is limited, which leads to the oversupply of domestic styrene, tremendous increase of self-sufficiency rate and obvious decline of external dependence. In addition, frequent unplanned shutdowns and planned maintenance of major international units result in a periodic shortage of supply.
Figure 5 Comparison of annual import and export data trends of styrene in China
In 2020, the styrene industry started to have a decline in the operating rate, and even phased low-load operation has become a normal phenomenon (see Figure 6). The main reasons for the decline are: first, the impact of the capacity expansion of equipment and the impact of the pandemic result in a more obvious oversupply in the industry; Second, planned or unplanned shutdowns for maintenance increase, under the influence of poor profitability and policies such as double control of energy consumption. Combined with the change of supply and demand in the later stage, styrene industry is still expected to be operated in a relatively low to medium level.
Figure 6 Comparison of daily operating rate of styrene in China from 2020 to 2022