World styrene demand, paced by a near doubling of combined requirements in East Asia and Oceania, could reach 19.3 million metric tons by 2000, an average growth rate of 3.7%/year.
So concludes Chem Systems Inc., Tarrytown, N.Y., in a study of world styrene markets through the end of the century.
The Chem Systems study generally describes an industry in transition, with progressive realignment of styrene supply and demand continuing to strain relationships between traditional and emerging players.
Pacific Rim styrene production and consumption throughout the 1990s are predicted to make up increasingly larger shares of world markets, while demand and production lag in the U.S. and western Europe. Demand and capacity in other parts of the world will grow in real terms, increasing combined market shares only slightly.
Chem Systems projects Pacific Rim countries in 2000 will consume about 7.12 million metric tons of styrene nearly 37% of anticipated world production-up from 4.38 million tons and 32% in 1991.
Most of the increase will be driven by demand in East Asia and Oceania, where consumption by century's end is expected to increase to 4.48 million metric tons from 2.25 million tons in 1991. Meantime, Japan's styrene demand in 2000 is projected at 2.64 million tons, a 500,000 ton increase from 1991 demand but a net market loss of 1.9%.
Chem Systems predicts a surge of capacity additions will hold down operating rates and reduce profit margins until the mid-1990s. Operating margins will firm after 1992 at about $100/ton and rebound gradually to about $200/ton by 2000.
PROGRESSIVE REALIGNMENT
Chem Systems predicts styrene demand in the Pacific Rim by 2000 will be nearly 60% greater than in the U.S. and western Europe. But much uncertainty remains.
Important unknowns include the level and distribution of styrene manufacturing capacity when the global economy begins to improve and how that will affect operating rates.
Among the most important factors affecting styrene markets in this decade, Chem Systems cites:
- Polystyrene and acrylonitrile-butadiene-styrene (ABS) production will continue shifting to Asia, where monomer feed is available at competitive costs and polymer use is expanding in the electronics and telecommunications industries.
- Interpolymer competition is escalating between polystyrene and polypropylene, high heat polystyrene and ABS, and styrenics and engineering resins.
- Environmental issues and intermaterial competition will increase reliance on disposable packaging, trimming growth of polystyrene and ABS demand by 1%/year-about I million tons of styrene by 2000.
Chem Systems does not expect to see a recurrence of market conditions in the 1980s, when excess capacity held profit margins down and discouraged further capacity additions until prices spiked in 1988, inducing another round of new construction and low prices.
"There's a global styrene market out there, and slugging it out is not the most profitable way to run a business," a Chem Systems official said.
STUDY HIGHLIGHTS
Marc Kalton, Chem Systems principal, said the cumulative effect in this decade of environmental issues on projected styrene markets is more significant than expected. That's especially true in Asia, where environmental concerns historically have been less than in western nations.
"I have been surprised about how seriously people in the Far East are considering issues like the amount of foam packing to use to package electronic products," Kalton said. "So there's a consciousness spreading worldwide about environmental issues, not just in the U.S. and western Europe. "
Kalton said China is a notable wild card in the outlook for global styrene markets. The country has ambitious plans to construct new styrene capacity, but uncertainty remains about whether everything planned will be built and how soon it will go on line.
Chem Systems projects that global styrene capacity in 2000 will reach about 22.5 million metric tons, up from about 16 million tons in 1991 and 19.3 million tons in 1995.
Additions in the U.S. will account for more than 85% of about 800,000 tons/year of new global styrene capacity placed on stream this year. But beginning next year through the end of the century, additions in Pacific Rim countries will lead capacity expansions worldwide, Chem Systems says.
Of the 2.5 million tons/year of styrene capacity to be added juring 199395, Chem Systems predicts about 1.45 million tons/year will be in nations on the Pacific Rim, including more than 600,000 tons/Year in Japan and 800,000 tons/year in other Asian countries.
Another 1.3 million tons/Year will be among the 3.5 million tons/year of new styrene capacity Chem Systems expects to be added after 1995.
About 300,000 tons of capacity will go on line in 1995-2000 in the Middle East. Capacity also is to be added in the U.S. and western Europe but not enough to offset lost market shares.
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