Styrene Industry Oversupply May Ease in 2024
In 2023, the global total capacity for styrene was 45,711kt/a, an increase of 7.04% from 2022, with the growth rate of capacity decreasing by 0.93 percentage points Y-O-Y. Over the past five years, the global capacity of styrene has shown a trend of slow growth followed by rapid expansion, with a CAGR of 4.76%.
The global capacity growth in 2023 was mainly contributed by China. Since 2020, China has entered a phase of rapid capacity expansion, with its share of global capacity rising from 26% in 2019 to 45% in 2023, accounting for almost half of the world’s total capacity. In 2024, styrene capacity growth is projected to slow down, while the downstream industries are expected to maintain rapid growth in capacity expansion, thereby alleviating the styrene industry's supply-demand imbalance.
In the past five years, China’s styrene capacity has been in a stage of rapid expansion, with a compound annual growth rate of 17.75%. The rapid increase of styrene capacity takes advantage of the 13th Five-Year Plan, which focuses on the construction and layout of refining and chemical base industries. With the landing of domestic refining and chemical integration projects such as Sinopec Quanzhou Petrochemical, Fujian Gulei Petrochemical, Zhejiang Petroleum & Chemical, Hengli Petrochemical, and PetroChina Guangdong Petrochemical, the styrene capacity reached 20.865 million mt/a by the end of 2023, nearly 1.5 times higher than in 2019. China’s styrene industry has officially entered the stage of overcapacity.
In 2024, the styrene industry capacity will continue to expand. With the improvement of industry supply capacity, non-integrated styrene units have been experiencing losses since December 2019. As of the end of 2023, the average annual profit of non-integrated styrene units is RMB -310/mt, a decrease of RMB 1,193/mt compared to 2019. The gradual decrease in industry profits and even long-term losses have lowered investor interest. China's new styrene capacity is predicted to reach 1.87 million mt/a in 2024, with a Y-O-Y growth rate of 8.96%, a fall of approximately 11 percentage points from 2023, showing a major slowdown in capacity expansion.
The newly added styrene capacity in 2024 may be concentrated in the second and third quarters, with older styrene plants undergoing extensive maintenance at this time. Among them, the two major units at Lihuayi Group and Fujian Gulei Petrochemical will be shut down at the end of March and be restarted at the end of April or early May, while the 600kt/a unit at Shandong Zhongtai Chemical Technology is expected to be put into operation in mid-to-late May. June is also about to enter the traditional off-season of demand, and the return of maintenance units combined with the commissioning of new units will put pressure on the price of styrene. The 500kt/a unit at Tianjin Dagu Chemical is scheduled for maintenance in September, while the 450kt/a unit at Jiangsu Hongwei Chemical is scheduled to begin operations at the end of the third quarter, potentially supplementing output losses caused by Tianjin Dagu Chemical’s unit maintenance. At the same time, the third quarter is the traditional peak demand season, so the negative impact of new capacity on prices may be mitigated.
The primary downstream sectors will continue to expand their capacity at a rapid pace, and the supply-demand imbalance in the styrene market may be slightly alleviated by 2024. The expansion of styrene capacity will slow down in 2024, while capacity expansion in the three major downstream industries continues apace. EPS capacity is projected to grow by 1.4 million mt/a, PS capacity by 1.51 million mt/a, and ABS capacity by 3.57 million mt/a. If all projects are put into operation, the rise in demand for styrene will outweigh the increase in supply. At the same time, China's styrene imports are dropping, while exports may slowly climb. As a result, the supply and demand balance in the styrene market is predicted to be tighter in 2024 than in 2023, but there will also be a surplus in some periods, resulting in a phased impact on price variations.
2024 China Newly Added Styrene and Downstream Capacity
The styrene supply and demand structure will remain in excess in the next five years, but the degree of excess will weaken first and then strengthen. The oversupply of styrene will improve in 2024 and 2025, mainly because the downstream industry has been at a high speed of capacity expansion in the past two years. During the capacity expansion period, styrene commissioning intensity decreased compared with the previous period, and the structure of benzene is relatively strong, which may limit the increase in styrene supply, so the oversupply of styrene will be alleviated somewhat. From 2026 to 2028, it is expected that with the survival of the fittest in the styrene industry, the market will be largely stable. However, after the concentrated release of capacity in 2026, capacity increases will gradually appear. Without the support of high-speed expansion of downstream capacity, the increase in demand will decline significantly, and the supply of styrene will decline significantly. Pressure on the styrene supply is expected to gradually increase. In the next five years, the degree of integration of the styrene industry chain is expected to further increase, styrene will gradually emerge as an intermediate product, and the risk of competition within the industry chain will gradually shift to the downstream in the future.
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