Petrotahlil :Although PS prices are heading southwards in China and Southeast Asia, regional producers continue to enjoy healthy margins as the upstream styrene market has witnessed larger drops than that of PS.
Increased margins for PS
Spot styrene prices on CFR China/FOB Korea have declined some 15% since early September, according to ChemOrbis Price Wizard while PS prices on CFR China/CIF SEA basis are down 5-7% over the same period, indicating that PS producers may have been able to maintain their margins.
The price gap between spot styrene and PS prices has widened due to the fact that styrene has witnessed larger declines. As can be seen in the graph below, the weekly average of GPPS prices on CIF China basis is currently carrying a premium of $230/ton over spot styrene prices on similar terms. The spread between the two has surged around $140/ton when compared to early September.
Weak styrene keeps PS production rates high
“Taiwanese and South Korean producers are looking at stable to lower PS prices heading into December due to bearish demand and lack of impetus from upstream feedstock styrene. But with styrene at low levels, there is no need to cut production. This week, still no talk of reduced production,” a regional trader said.
Another factor for not lowering production rates is possibly to make for lower prices with higher volume of sales.
Increasing capacities may further pressure styrene
“Styrene prices keep dropping because of new capacity in China. But PS is unlikely to fall as much as styrene because supply of PS is not so plenty. If prices move lower, then producers will have no profit anymore,” a source at a Vietnamese producer said.
Among the styrene capacities coming onstream in China are Zhejiang Petrochemicals’ 1.2 million tons/year unit in east Zhoushan in the current quarter; Hengli Petrochemicals’ 720,000 tons/year unit at Changxing Island, Dalian, with startup in this quarter and commercial output in the next quarter; and CNOOC and Shell Petrochemicals’ 700,000 tons/year unit at Guangdong, south Huizhou, slated for startup in the first half of 2020.
Also scheduled for startup in China in 2020 are Abel Chemical’s 500,000 tons/year unit at East Taixing, Jiangsu, and Sinochem Quanzhou’s 450,000 tons/year unit at South Quanzhou, Fujian, according to the ChemOrbis Production database.
Beyond this time frame, Vietnam Polystyrene is in discussions to build a 20,000 tons/year styrene unit at Haiphong for potential startup in 2021-2022.
Can producers resist PS pricing pressure?
Nonetheless, weak demand does exert pressure on producers to lower prices in tandem with styrene.
“It is puzzling why PS price is still at a high level since styrene monomer prices is below the $900/ton threshold,” a Malaysian end-product maker said, adding that he might wait for PS prices to fall further before buying.
The relatively smaller fall of PS prices has also prompted downstream businesses to adopt a wait-and-see attitude to avoid missing even lower offers.
Most producers rolled over PS offers for the second half of November while looking at lower prices into December, market players said.
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