Overcapacity Challenges in SM Industry Chain
The benzene-styrene-ABS/PS/EPS supply chain witnessed a capacity expansion peak over 2020-2024. Disparate timing and scale of new projects across segments narrowed overall industry margins while triggering profit shifts between products. Driven by moderating end demand and declining operating rates, new project launches are expected to decelerate over the next five years. ABS/PS/EPS expansions may outpace styrene and benzene, with ABS leading at a projected CAGR exceeding 8%.
Over the past five years, the styrene and its upstream and downstream industries have experienced a capacity expansion, with benzene, styrene, ABS, PS and EPS sectors achieving CAGR of 11.68%, 17.90%, 6.49%, 13.36%, and 16.11%, respectively. First, post-pandemic spikes in end-product demand (overseas order surges and domestic “home economy” trends) prompted ABS, PS and EPS producers—particularly PS due to lower technical barriers—to lead capacity expansions. Second, China’s integrated refining and chemical complexes entered a high-quality development phase, fueled by private capital influx and technological upgrades, triggering synchronized capacity growth across the benzene-styrene-ABS/PS chain.
The benzene-styrene-ABS/PS/EPS chain is projected to see slower capacity expansions from 2025 to 2029, with CAGR across all segments declining compared to the previous five-year period. Key constraints include moderating end demand, persistently falling operating rates, and maturing integrated refining development. All segments except benzene reported declining annual operating rates. ABS operating rates plunged 30 percentage points from 98% (2020) to 68% (2024), while PS also saw significant drops.
Over the next five years, the supply-demand balance (calculated as capacity growth rate minus total demand growth rate, except for EPS, which uses output growth rate minus total demand growth rate) across the industry chain is projected to show benzene outperforming styrene, and styrene outperforming downstream ABS and PS.
Benzene’s supply-demand structure will weaken significantly in 2025 compared to 2024, with oil-based benzene capacity expected to reach 27,710kt, up by 13.24% YoY, output rising 10.25%, and demand growing only 7.62%. Styrene’s supply surplus may persist from 2025 to 2028 but gradually narrow. For ABS and PS, weak supply-demand dynamics will continue through 2025-2026, with ABS capacity expanding by 35.24% (2025) and 10.81% (2026), and PS capacity growing by 25.51% (2025) and 6.93% (2026).
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