In 2010, after two years of contracting global demand, demand has resumed an upward trajectory and is now growing at the fastest pace since 2007 as per Chemical Market Associates, Inc. (CMAI)’s 2011 World Styrene Analysis. The likelihood is low that this level of demand growth will continue, since many markets are in rebound mode in 2010, and they will not grow by as much again next year. Most of the global styrene demand growth is currently from China therefore China's appetite for styrene will be the key to the recovery of the styrene market.
Polystyrene's share of total SM demand slipped back in 2010, while EPS and ABS demand are rising. At their forecast growth rates, EPS and ABS combined will overtake PS as a styrene end use by 2013, which is good news since they are growing much faster and will positively influence growth rates in the future. They have less price sensitive end uses than PS and will not be substituted as easily, should upstream cost pressures in the styrene chain escalate relative to competitive materials. Never before has there been more new styrene capacity added to the world market. The pro-rated growth in 2010 is almost 2.6 mln metric tons. On the other hand, never before has there been so much capacity taken out of service – a little over 700,000 metric tons in 2010. In the past few years, the industry has responded to high levels of capacity additions by capacity shutdowns, rationalizing styrene capacity and shifting styrene production from the mature West to the emerging East. Now, the rationalization in styrenics is finally approaching an end. Years of stagnating demand growth have caused a number of the leading companies in styrenics to focus on more profitable, faster growing businesses. Dow has sold its styrenics business, forming a new company called Styron. BASF has indicated that it will also sell or separate their styrenics business by January 1, 2011. The market is starting with a 6 million metric ton capacity surplus (at 100% utilization) but the effects of the capacity rationalization and more effective management of excess supply are starting to be seen. Demand certainly needs to improve but with the worst of the recession behind us, growth across the board in terms of derivatives is expected in 2010-2015. Over exuberance in constructing new styrene capacity has ended and there is little in the way of new construction in the forecast period. The recession has momentarily swept away many of these construction plans. With operating rates forecasted to improve, styrene producers can finally see better times ahead.