Over the past few years, styrenic producers have been faced with tough market conditions under the strain of a contracting market caused by aggressive substitution of polystyrene. Strong growth sectors such as EPS, ABS and SBR have also started to get pressured by recent dwindling demand from automotive and construction industries. Competition from ethylene-based plastics, which are easier to recycle, has made styrene less economic and desirable among western consumers. Additionally, key producers are beginning to feel the heat from new and increasingly competitive plants in the Middle East, particularly Kuwait and the United Arab Emirates, as well as in Asia Pacific. As these plants come onstream, they will snatch away export markets from North American producers and force older assets to shut.
BASF’s styrenics business is up for sale along with Dow’s bid to offload its styrenics business as part of its “asset light” strategy. Dow is the world’s second largest styrene maker and the largest producer of polystyrene, while BASF is the world’ third-biggest maker of styrene and polystyrene. As the era of audio and video tapes comes to a virtual end and the flatscreen television uses lesser material, BASF’s margins for polystyrene are shrinking to below 1%, less than half the level of 2007. BASF is in talks to form a joint venture for its styrene unit with sales worth US$4.5 bln while Dow is mulling sale of its similarly sized unit for Q1-2010. The sale of both assets at the same time probably makes it more difficult for both players, considering their cyclicality and commodity character and the low momentum in M&A.
Major mergers in the styrenics industry as per Chemsystems include INEOS NOVA in North America and Western Europe, Americas Styrenics in North America, Synthos in Central Europe, and LyondellBasell around the world. INEOS’ acquisition of the ABS business from Lanxess gave INEOS a broader styrenics portfolio, but also gave the ABS business access to INEOS’ acrylonitrile, styrene and butadiene. Dwory and Kauchuk merged to form Synthos, while Kauchuk previously purchased styrene and butadiene from Dwory. Producers have also attempted to exit the styrenics business. Huntsman’s exit is almost complete, following the sale of most of its business to Flint Hills Resources, and the closure of much of the remaining capacity. and recent partnering of other major commodity businesses suggests that it would also consider the whole or partial sale of its styrenics business. In Japan, earlier consolidations which formed two joint ventures – PS Japan, and Japan Polystyrene – proved insufficient, and all units are now likely to be closed. Mitsui Chemicals and Sumitomo Chemicals will halt two polystyrene plants and dissolve their Japan Polystyrene joint venture by end 2009, while Mitsubishi is anticipated to sell its shares in PS Japan to partners Asahi Kasei and Idemitsu Kosan and shutdown its last styrene plant by 2011.