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Downstream expansions, turnarounds to support Asia SM demand in 2014

By Gustav Holmvik

February 10, 2014 - Although demand for styrene monomer is currently sluggish and inventories are high in key market China amid the Lunar New Year holiday, new plants and plant expansions in downstream industries in Northeast Asia are expected to boost demand for SM in 2014, market sources said this week.

Weak demand from Chinese end-users in January pushed SM inventories held by traders in eastern China to 93,000 mt last week, their highest level in 18 months, as total inventory held by both traders and end-users was almost 160,000 mt, market sources said.

During Lunar New Year, which China is celebrating this year over January 31-February 6, factories and plants either lowered operating rates or shut due to a shortage of workers and low demand.

Several traders and market participants are predicting SM demand to remain weak in February and early March but to gain traction around mid-March.

Analysis continues below...

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Maintenance plans by many SM plants in Northeast Asia and China, especially in the second quarter, as well as a closed arbitrage between the US and Asia are also factors likely to trim supply and support prices in the near future, sources said.

From February to June, 15 SM plants plan to shut for maintenance in Japan, South Korea, Taiwan, Malaysia, Saudi Arabia and China. And from March onward, downstream demand is expected to rise from downstream industries, especially expandable polystyrene.

These factors coupled with weak prompt demand are the main reasons for the Asian SM market's current contango structure, sources said.

SM was assessed at $1,634.50/mt FOB Korea and $1,661.50/mt CFR China on Friday February 7, down 3.3% compared with the January 2 assessments of $1,691/mt FOB Korea and $1,718/mt CFR China.

Downstream expansions exceed new SM capacity

More downstream plants and plant expansions will be starting this year than SM plants.

A single additional SM plant is expected to start production in Asia this year: South Korean SK Global Chemical's idled 350,000 mt/year SM plant at Ulsan in May.

However, new downstream capacity includes almost 350,000 mt/year of polystyrene in China, more than 400,000 mt/year of acrylonitrile-butadiene-styrene in China and Taiwan and at least 185,000 mt/year of expandable polystyrene in China and South Korea.

But global demand remains a key question for market watchers who wonder if it will be enough to support high operating rates at the new downstream plants and expansions. Some sources polled expect the new capacity to lead to lowered operating rates and added pressure on downstream producers' margins.

ABS faces poor margins, poor demand

Despite China's shrinking ABS imports in recent years and weak-to-negative margins for ABS producers, more ABS production capacity is due to come on stream this year.

In 2013, China imported 1.67 million mt of ABS, a slight increase of 0.2% from 2012 but down 23% from the most recent peak of 2.169 million mt/year in 2011, customs data shows.

ABS producers have struggled with lower demand as China's export-oriented end-users have been hit by poor demand in overseas markets in the US and Europe after the 2009 financial crisis.

In spite of shrinking imports over the last few years, new capacity added this year includes a 250,000 mt/year expansion by Taiwan's Chi Mei that will raise its total plant capacity at Tainan to about 1.3 million mt/year.

In China, South Korea's LG Chem and China's China National Offshore Oil Corp aim to start a new 50:50 joint-venture 150,000 mt/year plant in Huizhou, Guangdong province, in the first quarter.

PS competition heats up

China's domestic polystyrene supply is expected to expand by almost 350,000 mt/year with two new and relatively large plants starting production mid-year.

France's Total Petrochemicals aims to start its new 200,000 mt/year polystyrene plant at Ningbo, East China, in July. And Huizhou Renxin is targeting a mid-year startup for its new 140,000 mt/year polystyrene plant in Guangdong.

China's 2013 imports of general purpose polystyrene increased 3.3% from 2012 to 787,714 mt, while imports of high-impact polystyrene slipped 1.5% to 231,443 mt.

Scheduled turnarounds for Asian SM plants in early 2014:

Company Location Capacity (mt/year) Turnaround timing
Jiangsu Leasty Jiangsu 420,000 February 6, one month
NS SM 3 Oita 230,000 February 25-April 7
Asahi Kasei 2 Mizushima 320,000 February 20-April 16
Sadaf 2 Al-Jubail 580,000 February-March, three weeks
Asahi Kasei 3 Mizushima 390,000 Early March-Early April
NS SM 2 Oita 190,000 March 14-April 20
LG Chem Daesan 180,000 Mid- to late March, 20 days
GPPC Tashe 130,000 February 15-March 11
GPPC Tashe 240,000 April 17-Early June
Idemitsu Chiba 210,000 April, one month
Samsung Total Daesan 650,000 Delayed to March, three weeks
TSMC 2 Lin Yuan 160,000 May-June, 30 days
Shanghai Secco Shanghai 650,000 Likely March-April
Sinopec ZRCC Zhenhai 620,000 May, 40-50 days
Denka Chiba 270,000 May-June, one month

See related chart: ABS imports into China (mil mt): 2010 - 2013

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