Shell Chemicals Report on Future of Styrene and Propylene Oxide Market in Asia Pacific

Speaking today at the ICIS 4th Asian Aromatics & Derivatives Conference in Bangkok, Thailand, Shell Chemicals' General Manager, Styrene Monomer/Propylene Oxide (SMPO) & derivatives, Yea-Yee Fang said: "Overall, Shell sees a long term future for styrene and derivatives in Asia Pacific. There is no doubt that it is a very challenging and competitive market. However, growth remains robust, and if - as we expect - benzene prices weaken as supply increases, we will likely see a shift in value towards styrene and its derivatives."

Yea-Yee Fang said: "We also see China remaining the major global growth engine for styrenics for the foreseeable future. While significant investment in new styrene capacity is set to continue in China, we believe feedstock constraints will mean the country will remain heavily dependent on very significant levels of imports in the long term."

Shell believes the strong growth in Asia Pacific demand for both styrene and propylene oxide will continue to create attractive opportunities for new SMPO investments. SMPO remains highly competitive due to the strong propylene oxide value chain and a production technology that offers integrated producers both cost and environmental advantages - including lower CO2 emissions, better energy efficiency and wastewater recycling - which are significantly better than alternative technologies for separate styrene and propylene oxide production.

"Shell is a committed and dedicated player in both the styrene and propylene oxide markets," said Yea-Yee Fang. "Our strategy is to invest in world-scale, integrated SMPO assets with new projects under development targeted for startup in the coming years to grow with our customers. Many of our regional investments so far have been in joint ventures, and we certainly see significant advantages and further opportunities to leverage our track record for successful partnerships."

Despite significant regional overcapacity in the styrene, polystyrene and expandable polystyrene sectors, Yea-Yee Fang said there was little drive for consolidation in Asia Pacific. While some older production units and those located far from the markets have been under pressure, operators prefer to idle capacity or operate at low loading rates when production economics are poor, rather than close plants, divest or form joint venture businesses. This may change, but not in the near future.

Concluding, Yea-Yee Fang said Shell believes styrene has a good future in Asia Pacific, but primarily for integrated producers with strong technology: "Fortune will not favour the brave. It will favour the advantaged!"

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