Recently, INEOS Styrolution, a wholly-owned subsidiary of the international chemical giant INEOS Group, announced that it will close its 430,000 metric tons/year styrene production base in Sarnia, Ontario, Canada by June 2026.
"The difficult business decision to permanently close the Sarnia plant was made after a lengthy assessment." Steve Harrington, chief executive officer of INEOS Styrolution, said: "The long-term prospects for the Sarnia plant have deteriorated to the point where it is no longer an economically viable operating asset. ”
On April 20 this year, the Sarnia plant was asked to shut down production to address issues related to benzene emissions. INEOS Styrolution said it is currently assessing the conditions needed to restart the plant, a process that could take about six months.
Styrene producers in North America have been battling a dire economic situation due to overcapacity. So far this year, North American styrene operating rates have been below 70%.
INEOS Styrolution said the decision to permanently close the plant had nothing to do with the current environmental situation.
"Over the years we have invested heavily in our Sarnia plant to ensure safe and reliable operations." INEOS Styrolution said in a statement that additional large investments unrelated to the potential costs of restarting operations would be necessary and that such an investment would be economically impractical given today's challenging industry environment.
According to the data, the Sarnia plant accounts for about 7% of the styrene production capacity in North America, and the ethylbenzene production capacity of the Sarnia plant is 490,000 tons/year in addition to styrene. INEOS Styrolution also operates two styrene plants in North America – a 770,000-tonne-per-annum plant in Bayport, Texas, and a 455,000-tonne-per-annum plant in Texas, Texas.
At present, the chemical industry is facing market difficulties such as overcapacity and weak demand, and some chemical companies are making some difficult decisions, including permanent closure of plants, project delays, or even cancellations.
In April this year, ExxonMobil and SABIC successively decided to close their ethylene plants in France and the Netherlands, citing financial losses and a serious lack of competitiveness in European plants, involving a total ethylene production capacity of nearly one million tons and a propylene production capacity of more than 600,000 tons.
Overview of the styrene market
Styrene is one of the most important downstream products of pure benzene. There are five main products in the downstream of pure benzene: styrene, caprolactam, phenol, aniline and adipic acid, which account for more than 90% of the total demand, of which styrene accounts for nearly 50%. There are three main products downstream of styrene: EPS, PS and ABS, which together account for about 70% of the total downstream demand. EPS terminals are for the building materials and packaging industry, and PS and ABS terminals are both electronic appliances, building materials and daily necessities, etc., and the application fields are different.
domestic market
In terms of the market, since 2020, China's large-scale refining and chemical integration projects have been put into operation one after another, and with the expansion of olefin and aromatic hydrocarbon production capacity, styrene, as its relatively main downstream industry, has also begun to expand its production capacity at a rapid pace. After 2020, the domestic styrene production capacity will be significantly accelerated, and the industry will officially enter the peak era of capacity expansion.
However, the rapid expansion of production capacity has made the styrene industry increasingly competitive. The risk of overcapacity is also gradually emerging, and some enterprises are facing problems such as insufficient operation and overstocking. Relevant research reports show that styrene will officially enter the stage of oversupply in 2023. By the end of 2023, the total production capacity of the industry will increase to 21.292 million tons, with a capacity growth rate of 21%; It is estimated that by the end of 2024, the annual production capacity of domestic styrene plants will reach 22.6515 million tons. However, in 2024, styrene is planned to be put into production less, and the growth rate of production capacity may slow down. It is reported that in 2024, only the 600,000 tons/year unit of Chambroad Petrochemical and the 450,000 tons/year unit of Shenghong Refining and Chemical are planned to be put into operation. In 2025, the growth rate of pure benzene production will increase, and the planned 1.3 million tons/year pure benzene production capacity in the Yulong Island refining and chemical project is planned to be put into operation.
Imports and exports
In terms of import and export, on the whole, the domestic styrene self-sufficiency rate is improving, and imports continue to shrink while exports increase. From the perspective of styrene import source countries, the proportion of Saudi Arabia's imports has increased year by year, while the proportion of near-ocean imports such as Japan and South Korea has decreased. By the end of 2023, the proportion of styrene imports from Saudi Arabia will reach 60%, and the increase in imports from Saudi Arabia is mainly due to the fact that the import raw material contracts of domestic styrene downstream factories remain in the low-cost region of the Middle East, and the supply in the Middle East is sufficient. By the end of 2023, imports from South Korea and Kuwait will drop to zero, and imports from Kuwait will drop to 3%. Some styrene producers in Taiwan, China, provide raw materials for their downstream production enterprises in the mainland, and the total import volume is relatively stable.
It is worth mentioning that on June 21, the Ministry of Commerce issued the Announcement of the Ministry of Commerce [2024] No. 24 Announcement on the Final Review of Anti-dumping Measures Applicable to Imported Styrene Originating in South Korea, Taiwan and the United States: from June 23, 2024, anti-dumping duties will continue to be levied on imported styrene originating in South Korea, Taiwan and the United States, with an implementation period of 5 years.
In terms of exports, it is expected that domestic styrene exports will still be dominated by offshore for the time being, and offshore exports still have a long way to go.
Price action
In recent years, styrene and its downstream industries have been plagued by profitability pressure, and the uncertainty of the commissioning of industrial chain devices has increased. In 2023, the profitability of the downstream industry is generally poor, and while plastics companies continue to expand their capacity, the follow-up of the terminal market seems to be inadequate. It is expected that the profitability of the domestic styrene and downstream industries will continue to be poor in 2024. In the next 2-3 years, the capacity expansion rate of styrene and downstream industries will still be relatively fast. Especially with the continuous entry of integrated devices into the market, it will be difficult for the profits of the styrene non-integrated industry to increase significantly.
Due to poor profitability, some foreign styrene plants have been shut down for a long time. This further reduces the supply in the international market, providing more opportunities for the export of styrene from the mainland. However, this also makes the international market more competitive, and puts forward higher requirements for the quality and price of styrene exports from the mainland. Looking ahead, styrene will optimize the industrial structure by eliminating outdated production capacity, and still need to maintain or even reduce the start of production through low profits.
Production process
The production process of styrene in China mainly includes three types: ethylbenzene dehydrogenation, ethylbenzene co-oxidation (PO/SM co-production method) and C8 extraction. Among them, the production capacity of ethylbenzene dehydrogenation process reached 16.645 million tons, accounting for 78% of the total styrene production capacity, and the PO/SM process has increased in recent years due to its profitability and environmental protection advantages, with the PO/SM process production capacity reaching 4.34 million tons by the end of 2023, accounting for 20.3% of the total styrene production capacity, and the total C8 extraction process capacity is 362,000 tons, accounting for 1.7% of the total styrene production capacity. The production capacity of C8 extraction process is relatively small, and the production capacity of a single unit in China is small, and most of them are old plants of early state-owned enterprises, but its main purpose is to recover the styrene components before the hydrogenation of pyrolysis gasoline, improve the value of the remaining C8 aromatic distillate, reduce the cost of hydrotreating, and make full use of resources.