In 2024, China is poised to witness a substantial decline in the growth of its styrene monomer capacity, marking a notable shift from the rapid expansion observed in the preceding years of 2020-2023. The industry landscape is undergoing a transformative phase, with the imminent launch of only two major plants this year – the Chambroad Petrochemical facility boasting a capacity of 600 thousand tons of styrene annually and the Luoyang Petrochemical plant with a capacity of 120 thousand tons per year.

Despite the deceleration in capacity growth, the sector is entering a period of heightened competition as it grapples with the challenge of establishing a dynamic equilibrium. The expansion of capacity no longer guarantees an increase in supply, especially given the backdrop of dwindling profitability and low utilization rates.

In 2023, China witnessed the commissioning of a total of 3.7 million tonnes of styrene capacity per year. This surge, coupled with escalating pressure on profit margins, resulted in an overall slump in the productivity of local styrene plants, plunging to a record low of 70-75% for the entire year. Several plants, particularly those with capacities below 300,000 tonnes per year, faced prolonged shutdowns, making low productivity a prevailing norm in certain facilities.

The repercussions of this capacity surge were evident in the inventories at eastern China's ports, which gradually dwindled to historic lows in the latter half of the year, sustaining that level for nearly four months. Forecasts for 2024 anticipate a continuation of low sales volumes, influenced by declining profitability and insufficient actual supply. In response to these market dynamics, most suppliers have been offering smaller discounts compared to the previous year when finalizing contracts for 2024.

Recognizing the challenging domestic landscape, some major producers situated in coastal regions are actively expanding their export activities as a strategic move to alleviate pressure from domestic competition. The intensification of China's capacity growth has reverberated globally, leading to the prolonged shutdowns of small factories within China over the past two years. Additionally, sizable facilities in South Korea have faced extended closures, and a number of factories in Europe have exited the market permanently.

In the face of increasing competition on the global stage, producers lacking a cost advantage find themselves under heightened pressures. The ongoing trend of competitive globalization is expected to persist into 2024, signalling a continuation of the process that may result in the phased-out production of those unable to navigate the challenges posed by this evolving industry landscape.