By Cui Jing, JLC
Styrene prices
After fluctuating sharply at the beginning of 2023, styrene prices in East China remained relatively stable until May, when the prices started falling. With the decline ending at the end of June, the prices soared in July and rebounded to RMB8 900-8 950/t – the highest level early this year – in late August, mainly because of rising prices of raw material pure benzene, relatively low operating rates of styrene plants, stable downstream demand, etc. (see Figure 1 for details).
Figure 1 Styrene price trend in East China, January-August 2023
Rapid expansion of styrene capacity
China’s styrene capacity currently exceeds 21 million t/a, given that only one outdated 250 000 t/a unit was eliminated by Abel Chemical Jiangsu Co., Ltd. at the beginning of 2023 but many new units – boasting a combined 3.83 million t/a capacity – were put into production this year, e.g. a 600 000 t/a unit of Lianyungang Petrochemical Co., Ltd., a 30 000 t/a unit of Shenghong Refining & Chemical (Lianyungang) Co., Ltd., an 800 000 t/a unit of Guangdong Petrochemical Company, etc. See Table 1 for more details.
At present, 42% of domestic styrene capacity is from East China, with local representative styrene firms including Zhejiang Petroleum & Chemical Co., Ltd. (China’s largest styrene producer boasting 2.5 million t/a capacity), Ningbo ZRCC Lyondell Chemical Co., Ltd. (1.26 million t/a), Shanghai SECCO Petrochemical Co., Ltd. (688 000 t/a), etc. Around 24% is from north China, where main styrene producers include Shandong Lihuayi Group (800 000 t/a), Wanhua Chemical Group Co., Ltd. (650 000 t/a), Qingdao Haiwan Chemical Co., Ltd. (500 000 t/a), etc.
South China accounts for 19% of the nation’s total, and major manufacturers are CNOOC and Shell Petrochemicals Co., Ltd. (1.4 million t/a), Guangdong Petrochemical Co., Ltd., which has China’s largest single styrene unit (800 000 t/a), Sinochem Quanzhou Petrochemical Co., Ltd. (450 000 t/a), etc. The fourth largest styrene production area is Northeast China, making up 10% of domestic styrene capacity. See Figure 2 for more details.
Figure 2 China’s styrene capacity distribution in 2023
Decreasing operating rates of styrene companies
Planned or unplanned equipment overhaul in many companies – e.g. Shandong Lihuayi Group, Zhejiang Petroleum & Chemical Co., Ltd., Sinopec Maoming Petrochemical Company, etc. – led to long-term medium-low operating rates of styrene industry. The average monthly operating rate in the first eight months of 2023 is forecast to have declined three percentage points YoY to 76% (see Figure 3 for details).
Figure 3 Output and operating rate of styrene industry, January-August 2023
Unsatisfactory operating rates made increment of styrene output far less than expected, although the output, spurred by new projects coming into production, hit new high. January-August output is forecast to have risen by 11.3% YoY to 9.9 million tons, with average monthly output reaching 1.24 million tons and the highest monthly output approaching 1.4 million tons in August.
Falling import and export volume of styrene
The import volume of styrene reached 585 100 tons in the first seven months of 2023, down 9.08% YoY, due to factors such as growing domestic capacity, domestic oversupply, declining degree of dependence on imported styrene, etc. The main import sources included Saudi Arabia, Taiwan of China, Japan, Singapore, Kuwait, the Netherlands, etc. In the seven months, the export volume dropped by 49.3% YoY to 239 700 tons, mainly to countries like South Korea, etc.
Three main downstream consumption areas
Capacity and output of three main downstream products of styrene grew in the first eight months of 2023, leading to a higher combined consumption proportion of around 70%, up one percentage point from a year earlier. Further, 5% was absorbed by UPR; 7% by SBR, SBL and SBC; and 18% by other industries like styrene-acrylic emulsion, MBS, pharmaceuticals, etc. Figure 4 shows styrene consumption structure from January to August 2023.
Figure 4 China’s styrene consumption structure from January to August 2023
Plummeting profits of styrene and downstream industries
Except in January, styrene industry – most of the time in 2023 – made little profit or suffered losses due to high costs of raw materials. The profits of downstream ABS, PS and EPS industries shrank significantly, given rising production costs and weakening demand, especially in late August, when ABS inventory was around 163 000 tons, PS inventory 78 000 tons and EPS inventory 31 000 tons, all higher than in the same period last year.
Profits of ABS industry fluctuated sharply, falling below the bottom line in late April, rebounded in June and declined below the line again in late August (see Figure 5 for details). As for the other two major downstream industries of styrene, i.e. EPS and PS, they have stayed at BEP (Break Even Point) for a long term.
Figure 5 Profit trend of styrene and three major styrene downstream industries in 2023
Styrene inventory and forecast of supply and demand
Styrene inventory in East China was 43 000-220 000 tons in the first eight months of 2023, reaching the highest in late February and the lowest in mid-August (see Figure 6 for details).
Figure 6 Styrene inventory in East China from 2021 to August 2023
The pace of putting new styrene units into use is predicted to slow down from the end of Q3 to Q4 2023: only a 600 000 t/a unit of Shandong Zhongtai Chemical Technology Co., Ltd. is planned to come on stream at the end of 2023, and quantity production is forecast to be achieved in Q1 2024. Two new units – a 200 000 t/a unit of Ningxia Baofeng Energy Group Co., Ltd. and a 600 000 t/a unit of Zhejiang Petroleum & Chemical Co., Ltd. – started production in Q3 2023, and will further release capacity in Q4 2023. Further, considering limited equipment overhaul plans of producers, styrene supply in Q4 2023 is likely to be higher than in Q3 2023.
Compared to capacities of EPS and PS, ABS capacity will grow more rapidly during the end of Q3-Q4 2023, stimulated by a 600 000 t/a unit of INEOS Styrolution, a 50 000 t/a unit of Ningbo LG Yongxing Chemical Co., Ltd., and a 300 000 t/a unit of Guangxi Changke New Material Co., Ltd. Further, a 320 000 t/a EPS project by Liaoning Shengye New Material Co., Ltd. is planned to come online at the end of 2023, and a 150 000 t/a PS project by Dalian Hengli Petrochemical Co., Ltd. will start producing in Q4 2023.
From the end of Q3 to Q4 2023, styrene supply and demand for styrene will both increase. However, in the long run, the balance of styrene supply and demand will probably be impacted by capacity expansion at the end of 2023 but shrinking demand from downstream firms, which will reduce or suspend production around the end of the year.
