EPCA: Anti-dumping investigations for styrene in China set to be a game-changer in 2018

02/10/2017 12:00 - 728 Views

The outcome of the anti-dumping investigations for styrene supplies from South Korea, Taiwan and the US into China expected in 2018 is set to be a game-changer for the industry, according to sources at the EPCA annual conference in Berlin Sunday.

In June this year, China's Ministry of Commerce started anti-dumping investigations on styrene imports from South Korea, Taiwan and the US, following a petition at the time by several Chinese styrene producers. The outcome is expected next year and this will significantly restructure trade flows, as well as put future styrene projects under threat, sources said.

The anti-dumping investigations are expected to strain Chinese styrene consumers in the shorter term.

"China will struggle," as one source put it.

China is the largest consumer of styrene and is currently net short product, meaning that it relies heavily on imports, mostly from the US, South Korea and the Middle East.

China plans to expand domestic styrene capacity to match demand growth. There are more than eight styrene projects in the pipeline between 2018-20, totaling over 5 million mt/year.

However, there are concerns over the timeline and feedstock security of these projects which sources have said could mean that any anti-dumping duty could be pushed back if the industry sees Chinese consumers suffering. TRADE FLOW SCENARIOS Any anti-dumping duties could change trade flows dramatically, sources said, explaining a few possible scenarios.

In H1 2017 this year, South Korea, Saudi Arabia and the US were the top suppliers of product into China. Although the US is traditionally a large supplier, and was the third largest this year, exports to China were unusually low compared with previous years due to unexpected outages in the US in February-March which meant that the US could not supply product globally.

Less product from South Korea, Taiwan and the US could mean that the Middle East will step up supplies to China, diverting product which otherwise would be destined to India, a source said.

As a result the US could increase supplies to India.

There could be a "swap business," a trader source said.

Another possibility is South Korea exporting product to Japan to be re-exported to China, allowing for more opportunities for traders, sources previously said.

Adding to this, however, it is unlikely that Japan will consume South Korean styrene due to consumer requirements.

Another likely destination for US styrene is Europe, sources said.

There is a possibility that the European market could lengthen as more and more US supplies are diverted to Europe.

From a cost perspective, US styrene costs are lower than Europe, which would mean that US producers will have an advantage, sources said.

In 2015 and 2016, the EU's imports of styrene totalled 161,384 mt and 280,040 mt respectively. In January-July 2017, imports from the US totaled 81,523 mt, down 61% from the same period last year. As with exports to China, the fall in volumes was due to the outages seen in the US early this year. FUTURE PROJECTS UNDER THREAT

The anti-dumping duties could also put future projects outside of China under threat, sources said.

Most recently, Taiwan Styrene Monomer Corp (TSMC) was heard to be reconsidering plans to set up a styrene monomer joint venture with state-owned refiner CPF Corp due to the possibility of duties, the Taipei Times reported. An official comment was not availability at the time.

The plant's planned production capacity is 250,000 mt/year.

The company will reassess the project in Linyuan District in the Principality of Kaohsiung, TSMC vice president T.K. Chung said at a press conference, according to the Taipei Times report.

Certainly, the outcome of the anti-dumping procedures in China will be eagerly watched by styrene market participants to see how wide-ranging an impact it might have in 2018 -- in China, and around the world.

Source: S&P Global