Market and product

Speaking at the 10th European Aromatics & Derivatives Conference in Amsterdam, Europe president Martin Pugh said that demand growth will start to overtake capacity additions in the next three years, which will lead to operating rates gradually moving back closer to 90%, from the 80% level seen since the downturn in late 2008.

While Pugh added that global styrene demand growth forecasts have been reduced to 3.3% from previous expectations closer to 4%, growth levels varied between the different downstream sectors.

The polystyrene (PS) market, which has struggled with oversupply despite a 25% capacity reduction over the past five to six years, is forecast to grow by only 3%, while other derivative markets such as expandable polystyrene (EPS) and acrylonitrile- butadiene-styrene (ABS) may expect to see growth rates of up to 5–6% from now until 2014.

The low volume of recycled PS also poses a challenge, with Pugh arguing that the industry needs to find bigger markets in order to cultivate additional growth for the polymer.

For the European ABS market, increasing capacities in the Middle East and Asia as well as the EU/South Korea free trade agreement both present challenges for future growth.

One of the key drivers behind the instability of the styrene market since 2008 has been the upstream price volatility seen for crude, naphtha and ethylene and the resulting effects on feedstock benzene.

However, Pugh added that within Europe, production outages and import delays have also meant that styrene has a life of its own when it comes to price volatility.

November has seen the highest spread between European benzene and styrene levels since 2002, as prompt tightness for styrene drove up pricing while benzene dropped to a 14-month low on the back of weak demand from key downstream markets and wider macroeconomic uncertainty.

Other challenges facing the styrenics sector, according to Pugh, are the difficulty for ABS players in passing on butadiene (BD) costs to customers, and competition from other polymers such as polyethylene terephthlate (PET) and polypropylene (PP), as well as increased financial pressure on end-user markets.

Several delegates at the conference raised the growing issue of styrene being labelled a carcinogenic substance by the US Department of Health and Human Services, something that has spread to Europe following a Proposal for Harmonised Classification and Labelling from Denmark’s Environmental Protection Agency, which was made public in the past few weeks.

Pugh said that the impact on demand was so far difficult to gauge, but stressed that the industry needed to “get on the front foot” and defend itself.

“[The industry] has good stories to tell, but has not done a good job of it so far,” said Pugh.

The 10th European Aromatics & Derivatives Conference, organised by ICIS and International eChem, is taking place in Amsterdam on 22–23 November 2011.