Starting from mid August this year, the styrene market, which had been dormant for half a year, began to strengthen. As of mid September, in just one month, the growth rate reached as high as 20%. At one point, it reached a high of 11850 yuan/ton, just one step away from the highest price of 12000 yuan/ton so far this year. The sharp rise in styrene in this round is influenced by the shutdown of some domestic facilities and strong downstream ABS demand. Among them, the expected decrease in import volume has played a crucial driving role.
As is well known, China has been a net importer of styrene for a long time. Although domestic production capacity has gradually increased in recent years, leading to an increase in domestic styrene supply, as of the end of 2016, the dependence on styrene imports remained around 40%. Changes in the international market have had a significant impact on the trend of the domestic styrene market.
Starting from August, the supply in the European market has continued to tighten, with the Gonfreville styrene unit in France experiencing force majeure. Some styrene units are scheduled to undergo maintenance and replace catalysts in September, leading to a significant tightening of supply in the European market and a rapid surge in prices. Due to the significantly higher prices in Europe compared to the United States and Asia, and the lower shipping costs between Europe and America compared to the United States and Asia, most American traders choose to relocate their goods to Europe, thereby reducing their supply to the Asian market.
The main source of imports for our country comes from the United States. In mid to late August, affected by Hurricane Harvey, the Texas and Louisiana regions suffered heavy losses. The United States has a total styrene production capacity of about 4.8 million tons, and these facilities are located in the disaster stricken areas mentioned above. As a result, a total of 2.47 million tons of facilities located in the local area of Benling and LyondellBasell were shut down, while other producers partially reduced their load operations.
In addition, the anti-dumping investigation into imported styrene originating from South Korea, Taiwan, and the United States, which began in June, has also played a supportive role in the mentality of market traders. For a long time, the above regions have been the main sources of imported styrene in China. Taking the data from January to July this year as an example, among all import source regions, South Korea accounts for 36.0%, the United States accounts for 9.1%, and Taiwan accounts for 6.3%. The three together account for half of the imported goods. If it is ultimately determined that the products in these regions have anti-dumping actions, the domestic styrene supply pattern will undergo significant changes, and domestic products will become the biggest beneficiaries.
In the long run, with the gradual release of domestic production capacity, the guiding role of the international market in domestic price trends will be reduced, and the discourse power of domestic products will gradually increase. In 2016, domestic production capacity increased significantly by 865000 tons to around 8.55 million tons compared to the previous year. In 2017, the 80000 ton/year plant of Jiujiang Petrochemical and the 120000 ton/year plant of Ningbo Keyuan have been put into operation. In the future, there will be plans to put into operation the 630000 ton/year plant of CNOOC Huilian Phase II and the 500000 ton/year plant of Qingdao Alkali Industry. If the plant is successfully put into operation, the domestic styrene production capacity will reach 9.88 million tons by the end of 2017, further improving the industry's self-sufficiency rate.
At present, the domestic styrene market is still largely influenced by the international import market. If anti-dumping measures are established in the later stage, combined with a significant increase in domestic production capacity, the self-sufficiency rate of the styrene market will be effectively improved, and the discourse power of domestic products in the market will be further strengthened. However, due to the unique advantages of import sources, the process of domestic substitution for imports will be long and full of uncertainty.