By Sun Nan, CNCIC

Polystyrene (PS) mainly includes general-purpose PS (GPPS), high-impact PS (HIPS) and expanded PS (EPS). HIPS has high impact strength, good toughness, can be coloured arbitrarily and has good molding performance, good resistance to chemical corrosion and electrical properties.

Surplus supply eased slightly

   China’s HIPS capacity dropped from 1.40 million t/a to 1.39 million t/a during 2014-2018, with compound annual growth rate (CAGR) at -0.2%. Meanwhile, domestic HIPS output increased from 808 kt to 1 024 kt, with CAGR at 6.1%. In 2018, domestic HIPS production rose by 63 kt or 6.6% year on year. The growth in output is mainly attributed to three factors. First, online consumption, from the e-commerce, express delivery and food delivery industries has been accelerating HIPS consumption. Second, more buyers prefer HIPS over ABS, given the widening price gap between the two since 2016. Third, the replacement of recycled materials by virgin materials has also been boosting HIPS consumption. 
   The overall operating rate of the domestic HIPS industry surged during 2014-2018 from 57.7% to 73.7%. Optimised supply-demand structure helped alleviate surplus HIPS supply. Table 1 shows China’s HIPS supply-demand situation in 2014-2018. 

    Table 1   China’s HIPS supply-demand situation in 2014-2018 (kt)

   Domestic apparent HIPS consumption increased from 991 kt to 1 372 kt in 2014-2018, with CAGR at around 8.5%. The consumption volume decreased by 0.7% year on year in 2015 and then rose by 5.9% and 7.6% respectively in 2016 and 2017, before a year-on-year surge in 2018 at 22.5%.
   Meanwhile, China’s average annual growth rate of net HIPS imports reached 17.6%. Its net HIPS imports dropped from 182 kt to 133 kt during 2014-2016, as consumption growth slowed down amid steadily rising domestic output. From 2016 to 2018, accelerated growth in demand pushed up China’s net HIPS imports from 133 kt to 349 kt.
   A hefty volume of new capacities is expected to boost domestic HIPS capacity to 1.79 million t/a in 2020, with CAGR at 13.5% during 2018-2020. By then, the overall operating rate of the domestic HIPS industry may be relatively low at around 61.5% and output at around 1.10 million tons. In 2018-2020, the average growth rate of domestic HIPS consumption is predicted at around 2.4% and consumption volume will stand at 1.44 million tons by 2020, when net HIPS imports are estimated at around 340 kt.

   There may be limited HIPS capacity additions in China during 2020-2025. Domestic HIPS capacity is expected to reach 1.89 million t/a by 2025, with the annual growth rate only at 1.1% in 2020-2025. Domestic plants may operate at low rates, with the average level at around 64% in 2025 and domestic output will be around 1.21 million tons. The average annual growth rate of domestic HIPS demand is predicted at 0.5% in 2020-2025 and demand will total 1.48 million tons by 2025, while net HIPS imports may stand at around 270 kt.

Three rival powers dominate China’s HIPS production

   GPPS and HIPS display flexibility in their production process and facilities. Hence, producers may introduce many production lines and allocate them for HIPS and GPPS production, or switch production between the two. In 2018, there were 25 GPPS/HIPS producers in China, of which, 16 produced HIPS. Details are shown in Table 2.

   Table 2    Major HIPS producers in China in 2018

 
   Domestic HIPS manufacturers are classified into three types in terms of ownership: foreign-invested, state-owned and privately owned enterprises. Foreign-invested enterprises account for over half of China’s domestic HIPS production.
   In China, HIPS production technologies are provided by six patent owners, including FINA process (Total being the patent owner), INEOS process, Trinseo process (the former DOW process), Chevron process, DCS process and Chimei process. FINA process is the most widely used in China. Nine producers adopt such a process. Their capacities amount to 585 kt/a, accounting for 42.1% of the domestic total.
   There are a slew of capacity expansions for China’s HIPS industry during 2018-2020, on demand for HIPS to substitute ABS in 2016-2018. By April 2019, five new and planned HIPS projects have been heard reported in China, with combined capacities at 500 kt/a. Table 3 shows new and planned HIPS resin projects in China.  

   Table 3   New/planned HIPS resin projects in China

Unstable consumption

   HIPS consumption is unstable, subject to changes in downstream industries development, feedstock costs and competitions over its substitute ABS resin.
   China’s apparent HIPS consumption stood at 1 372 kt in 2018, up by 22.5% year on year. The increase was mainly driven by the following factors. First, downstream industries staged sound development, especially in 2017-2018, when restocking activities of the domestic air-conditioner industry sharply boosted HIPS consumption. Second, wide price spread between HIPS and ABS spurred a notable rise in demand for HIPS to substitute ABS resin. Third, booming on-line shopping fueled the demand from the daily necessities, packaging containers, office supplies and toys, etc. Fourth, China’s imports of recycled HIPS surged in 2018.
   In terms of China’s HIPS consumption structure, HIPS resin is mainly applied in electronics and electrical industry, especially the home appliances sector, accounting for 74.7% of its consumption. Other application fields include packaging containers (8% of consumption), office supplies (5.4%), and daily necessities (5.0%).
   In the future, HIPS demand growth will be mainly driven by the development of electronics and electrical industry, particularly the major appliances sector. Demand growth in the electronics and electrical industry is expected to slow down in 2018-2020, with the average annual growth rate at around 1.7%.

Surrounding countries/regions are major import origins

   China’s HIPS imports surged to 379 kt in 2018, up by 96.4% (186 kt) year on year. This is mainly attributed to low import HIPS prices, more import volumes of recycled materials and steady demand growth.
   China’s major HIPS import origins in 2018 included Malaysia, Taiwan, Hong Kong, South Korea, Thailand, Japan and other surrounding countries or regions in Asia. The imports from Malaysia soared from below 10 kt to 93 kt, accounting for 24.7% of China’s total. Taiwan won the second ranking in HIPS imports into Mainland China, at 80 kt, covering 21.2% of the total. Hong Kong took the third place by exporting 59 kt of HIPS to Mainland China, occupying 15.6% of the total. The imports from South Korea were 54 kt, covering 14.2%. The four origins together accounted for 75.7% of China’s HIPS imports during 2018.
   China’s export volume of HIPS was relatively low, at 14-36 kt during 2010-2018. China exported 30 kt of HIPS in 2018.