Styrene margins in 2009 have not been as bad as suggested by the low operating rates. A very weak propylene oxide market curtailed styrene production via the POSM route, which created a tight market in the early part of 2009. As propylene oxide demand improved, so did styrene availability, having a negative impact on styrene margins as evident in H2-2009. Overall, market conditions were tough due to the weak demand and overcapacity. The industry has been diligently scrapping capacity in the last couple of years, but a demand decrease of this magnitude has created an even wider output gap. As a result, more producers are heading for the exits or reducing their exposure to their "toxic assets." World average operating rates for styrene are not forecast to surpass even the mid 80% level in the coming years, despite projections that styrene demand growth will resume at levels near GDP. Without further capacity closures, operating rates throughout the forecast period are projected to remain below the rates recorded during the last trough in 2001. This scenario will unfold even without any confirmed capacity expansions after 2012. Even more likely, however, is additional capacity closures. The world market leaders in the styrene and styrenics industry are leading the way out. Growth across the board in terms of derivatives is expected in 2010. Geographically, all the significant markets are expected to see growth in styrene demand. The average annual growth rates for styrene consumption into its derivatives during the 2009-2014 periods are fairly reasonable, but originate from a low base year, and are consistent with history. As with the world economy, CMAI expects growth rates for styrene to resume "pre- crisis" levels, but without the global market regaining the lost ground quickly. In fact, the world styrene market is not forecast to reach the 2007 peak consumption level until 2012.
One of the most important trends in the supply of polystyrene has been the rationalization and/or divestment of assets, especially in the mature markets of North America and West Europe. The trend in those regions has been driven by declining domestic markets, the migration of consuming industries and a lack of export competitiveness. Asia has needed massive consolidation for some time but the industry hardly seems to have the energy left to renew itself, as those in the developed markets have already. On the demand side, the most important problem facing the polystyrene business is the almost uninterrupted decline it has experienced. PS is a mature product that is heavily exposed to price sensitive end-uses having a number of competitive pressures from alternative materials, both natural and synthetic.
EPS is the second largest styrene derivative. Polystyrene, EPS and ABS are the three largest styrenic derivatives representing nearly 75% of styrene demand. Demand growth for EPS during most of this decade has been rather spectacular, excluding the recent economic collapse. From 2000 to 2007, the world EPS market growth outpaced global GDP growth of 3.2%. This is even more impressive when you consider that this includes a period where economic growth stalled in the early part of this decade. The recent economic recession, however, has taken a toll, with demand decreasing over the last 2 years. The combination of “no growth” in polystyrene and decent growth in expandable polystyrene has caused EPS to grow from the position of 14% of styrene demand in 2000 to almost 20% of styrene demand in 2009. Over time, expandable polystyrene is becoming a more important part of the styrenics demand picture.
Styrene consumption was weak in 2008, principally due to high feedstock prices, competition from other polymers, and the weak economic environment which has affected consumption in most sectors of the economy, as per Chemsystems. Polystyrene remains the largest styrene consumer, although the global market has all but ceased to grow. Among the other derivatives, demand into EPS has accelerated at the highest rates, driven by packaging and construction sectors, and an increasing focus on energy conservation in buildings. Styrene demand into ABS and SBR performed strongly over 2006-7, reflecting high economic growth and the expansion of vehicle and automotive component manufacturing in developing regions. In comparison with polystyrene, ABS is less vulnerable to substitution by other polymers, due to its superior physical properties and the price of alternatives. Growth of SBR production was supported by the limited availability of natural rubber. However, the limited availability and record price of butadiene feedstock adversely affected the market of both derivatives in 2008. EPS and ABS will be the key drivers of styrene consumption - EPS’s share of global styrene demand has risen from 13% in 2000 to 18% in 2008, while ABS share has increased to a lesser extent due to lower styrene consumption per ton of the polymer. In contrast, polystyrene’s share is in steady decline.
The first three quarters of 2008 have also seen a sharp increase in polypropylene prices in comparison with polystyrene as a result of high feedstock price and tight supply. If this trend continues, some converters could switch back to polystyrene. Growth of expandable polystyrene (EPS) demand appears the least likely to be influenced by the global economic issues. Insulation is the primary means of reducing energy consumption in buildings, and EPS usage is increasing both in new-builds and remedial work on existing buildings. The growth of EPS in packaging is more regionally focused in areas which export appliances and perishable foods. Demand growth for ABS will be centred in regions such as Central Europe, Russia, China and India where automotive, electrical and electronic manufacturing activity is expanding. Demand in these regions will be driven by both local and export demand for finished goods.
Styrene butadiene rubber (SBR) consumption has been growing at similar rates to GDP over the past ten years. The geographical development of demand however reflects increasing car usage in developing countries and flat growth in North America and Western Europe. The scale of growth in developing regions will however outweigh the slowdown in mature markets, and consumption will grow at faster rates over 2008-2015 than it has over the past decade. The popularity of bio fuels has increased the competition for agricultural land, and impacted on the rubber industry by restricting the availability of land for natural rubber production. SBR consumption is further supported by the increasing usage of energy saving tires and the trend of “Radicalization”, both of which favor a higher proportion of synthetic rubber in tire compounds. The Middle East and Asia Pacific are emerging as the focus for global capacity development. In 2000, styrene capacity in North America and Western Europe accounted for just over half of the global total. This declined to 43% in 2008, and is forecast to decline further to one third installed capacity by 2015. Several world scale plants are under development in the Middle East, which will allow both significant downstream expansion, and sufficient volumes of surplus styrene for the Middle East to become the world’s dominant exporter. Massive capacity additions are also underway in Asia Pacific, facilitated by the huge increases in ethylene and benzene production from liquid fed steam crackers in the region. New styrene projects proposed in Brazil, Canada and Egypt now look doubtful due to the growing global overcapacity. The increasing availability of benzene in the United States will allow it to retain its role as supplier to South America, while the Middle East will supply the import requirements for most other regions. The restructuring and consolidation of the styrenics industry has advanced significantly in recent years, but is expected to continue given the poor economic outlook and expected overcapacity resulting from new and increasingly competitive plants in the Middle East and Asia Pacific. In the past few years, oversupply and unacceptable margins have led producers to merge businesses and close surplus capacity. Mergers have occurred both horizontally to lower costs and consolidate the supply base, but also vertically to improve integration with feedstock. Divestment of styrenic business is another strategy used by many producers. Huntsman has exited the styrenic business. BASF as well as Dow styrenic businesses are likely to get sold