China styrene monomer makers' profitability worsening
In China, styrene monomer (SM) makers' profitability is worsening since supply is ample and demand is dull.
Since March, the crude market has been bullish and main feedstock ethylene and benzene prices are firm. Feedstock costs are staying at high levels. Further, COVID-19 cases are increasing in China and demand is receding. Logistics and operations of derivative facilities are affected. Inventories of several derivatives increased and buying interest for SM is receding. Demand for export is not strong either. As a result, profitability of SM makers is hardly secured.
Meanwhile, supply is expected to increase going forward. Supply from new facilities has picked up speed by the end of March. In the quarter April to June, three new facilities are scheduled to start up. Further, in the quarter July to September, new and expanded SM facilities with production capacity of 3.55 mil mt/year are expected to start operations. Facilities that have been shut down due to worsening profitability are expected to restart in April and supply pressure is rising.