Viewpoint: US benzene, styrene face lower 2021 demand

US benzene could see lower demand from styrene production in 2021 as added styrene capacity in China may result in lower US styrene exports to Asia.

China has added more than 2mn t/yr of styrene capacity since the start of 2020, and is expected to add 250,000 t/yr more by the end of the first quarter of 2021.

US benzene prices could see support next year from lower imports as a result, however, as increased Chinese benzene demand pulls typical South Korean imports away from the US. Non-integrated styrene producers in Asia will face pressure to lower operating rates, while that pressure will be less for US producers as they remain cost-advantaged globally.

US ethylene spot prices may rise next year as exports increase, further narrowing US styrene margins.

Despite weaker exports, domestic styrene demand is expected to see ongoing support from packaging.

Styrene demand from the automotive sector for styrene butadiene rubber (SBR) is likely to be mixed, as the overall economic slowdown limits new car purchases and increased work from home habits lead to less driving. But increased tariffs on imported tires could also keep SBR demand strong as producers look to build inventories. The US International Trade Commission (ITC) investigation into anti-dumping duties (ADDs) on SBR was expected to conclude in November but has been delayed until March 2021.

Domestic benzene production is not expected to increase until economic activity picks up following the Covid-19 pandemic, as refinery operating rates are subdued because of low demand for gasoline and middle distillates, curbing reformer operating rates.

Production of benzene from selective toluene-disproportionation (STDP) and non-selective TDP units is expected to start the year on an uptrend because of wide spreads between benzene and toluene, which will narrow on seasonal increases in demand for toluene for gasoline blending.

TDP and STDP units will also face margin crunches as values for mixed xylenes (MX) and paraxylene (MX) remain lower. Global PX prices are expected to remain low given recent gains in Asia production, which will keep a ceiling on STDP margins. Those lower PX prices are also expected to curb margins in the US at MX-PX units, putting a ceiling on MX prices and lowering TDP unit margins.

Domestic benzene production from pygas is also expected to be mostly steady, as crackers prefer lighter feedstocks such as ethane and propane to pygas, owing to more positive margins.

By John Dietrich