Chinese independent styrene monomer (SM) producer Abel Petrochemical will shut its 250,000 t/yr plant this week for financial restructuring reasons because of margins pressure and difficulty in buying co-feedstock ethylene.
Its non-integrated plant at Taixing in east China's Jiangsu province started up in 2017. It is not immediately clear how long it will remain shut. The plant was first completed in 2013 but only started up in 2017 after changing owners and securing fresh financing. Plans for a second 250,000 t/yr unit have been shelved.
Abel started up when SM production margins for non-integrated producers averaged $80/t in 2017, doubling to $160/t the following year. But SM prices have been falling since June 2019 with more than 8mn t/yr of new SM production capacity in China planned over 2019-24. Prices fell from a peak of $1,100/t cfr China since mid-2019 to hold at around $900/t cfr in December. They endured another slump when the Covid-19 pandemic hit China earlier this year. Prices touched a low of $500/t cfr in April and have been rangebound at $650-680/t cfr throughout August.
Production losses for standalone producers have averaged at $40/t so far this year. Derivative operating rates in China have been the highest in recent years despite the pandemic, keeping SM demand firm. But this has not been enough to balance out the oversupply in China, resulting in persistently high domestic SM inventories. Inventories in east China have held at 280,000-320,000t from April until now.
This is happening against the backdrop of even more supplies emerging in China, as Bora LyondellBasell expects to achieve on-specification production at its 350,000 t/yr Panjin plant later this month. Almost 2mn t/yr of new supplies were already added to China's capacity earlier this year when Zhejiang Petrochemical and Hengli Petrochemical achieved on-specification and stable production by March this year.
SM operating rates in China have remained high and above 80pc as producers opted for cash flow and to fight for market share.
SM producers that are integrated upstream are also enduring margins pressure, although this is less severe than those of non-integrated producers. SM producers integrated downstream to produce acrylonitrile butadiene and polystyrene are seeing firmer margins, leaving only standalone SM producers at a disadvantage.
