The world faces a chronic surplus of styrene

　　Due to overcapacity, further supply increases and weak downstream demand, the market is bearish on the global styrene market, with Europe being the most prominent. At present, market participants generally expect that the global styrene market will remain structurally surplus until 2030. Bearish market fundamentals and the fact that Europe is being dragged down by the world's highest production costs have led to an increasing number of styrene plants being shut down, shut down and reduced production.

　　In November, Trinseo announced the permanent closure of its 500,000 mt/year ethylbenzene and styrene plant in Ternezen, the Netherlands. Previously, Trinseo had closed its 300,000 mt/year styrene plant in Brun, Germany, in December 2022.

　　Trinseo's capacity contraction reflects the reality of a decline in the European styrene market. European styrene producers have faced extreme challenges to margins so far this year, mainly due to high energy prices and declining demand for downstream derivatives polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) resins. According to S&P Global data, a price difference of $200~$250 per ton is usually required between the spot price of raw benzene and styrene to guarantee profits, but for most of this year, the spread has been well below this level. According to Platts, a subsidiary of S&P Global, on November 21, the price difference between benzene and styrene in Europe was US$71.5 per tonne, and the assessed price of styrene loaded in the next 5~30 days was US$990.5 per ton, while the assessed price of benzene delivered in the next 5~30 days was US$919 per ton. "The spread between benzene and styrene remains low, making it unfeasible to produce styrene and losing money to produce and sell styrene," a market source said. Another source said downstream PS and ABS resin producers are also operating at low rates, with more than one producer having to close more production lines over the Christmas period.

　　In the first quarter of 2024, the outlook for styrene remains poor. "Some producers in Europe will have to reduce their operating rates due to weak demand," a source said. With producers all losing money, Europe will have to rely on imports. "In an announcement announcing the closure of the Ternezen plant in the Netherlands, Trinseo CEO Frank Bozzich said that Europe has become one of the most expensive regions in the world to produce styrene due to rising energy prices in Europe. Bozihi said that given the reduced demand in Europe and the increase in global styrene production capacity, Trinseo believes that styrene will remain structurally surplus by 2030.

　　Trinseo first announced in August that it might close its Ternezen styrene plant in the Netherlands. According to market sources, the plant has been shut down for economic reasons, indicating a weak European market. A source told Platts that the shutdown of the Ternezen styrene plant had limited impact on the European market due to continued weak demand.

　　Low profit margins also forced the joint venture between LyondellBasel and Covestro, the propylene oxide and styrene monomer (POSM) plant in Maasvlakte, the Netherlands, to shut down operations in July this year. Covestro spokesman Frank Rosbart's remarks at the closure of the plant referred to the economic situation, in particular the decline in demand due to persistently high inflation. According to S&P Global, the Maasvlakte plant has a nameplate capacity of 680,000 tonnes per annum.

　　In the midst of a downturn in the market, Trinseo is considering divesting its styrene-related businesses. Currently, Trinseo has a PS capacity of 440,000 mt/year in Schkopau, Germany, and Tysendello, Belgium. The company has said it will weigh its entire styrene-based business options. With the global styrene market already in the doldrums, market analysts say Trinseo is likely to choose to divest its holdings of Americas in the United States 50% stake in Styrenics LLC (AmSty). AmSty, a joint venture between Trinseo and Chevron Phillips Chemical, has a styrene production capacity of 526,000 mt/year.

　　Trinseo is not the only producer interested in divesting its styrene business. Bloomberg reported on November 20 that TotalEnergies and SABIC are considering selling their 1.2 million mt/year styrene and PS plant in Cavill, Louisiana, USA. Combined, the assets could be worth $1 billion, according to people familiar with the matter.

　　At the same time, some market participants said that overcapacity in Asia is putting pressure on the global economics and prices of styrene. S&P Global's latest Aromatics Asia Monthly Report shows that Asian styrene margins are expected to remain bearish in the near term due to weaker-than-expected downstream demand. However, the market is expected to strengthen in the second half of 2024 as downstream demand for ABS and PS in Asia improves.