We think the India styrene plan is ill-advised. The styrene market has had a brief moment in the sun over the last couple of years, but we believe that it has another leg down ahead, based on the recycling complications of polystyrene versus other packaging polymers. New capacity in China and likely weaker demand in the US and Europe should push the global market into oversupply for a prolonged period (if not permanently). This is bad news for styrene (or polystyrene) producers but very good news for the non-integrated producers of styrene derivatives targeting the durables markets – such as Kraton.
The market is already in trouble in Asia, with demand weakness in China and new capacity – while demand in India may justify more local production the country will likely be able to import material more cost effectively than it can make it and the ethylene would be better used in derivatives that have strong global growth and where India has a growing deficit – such as PVC. See today's daily report for more.
