Taiwan's Formosa Chemicals to Temporarily Close Two Styrene and Aromatic Units

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Researched by Industrial Info Resources (Sugar Land, Texas)--Taiwan's Formosa Chemicals & Fibre Corporation (TPE:1326) (FCFC) (Taipei, Taiwan) has announced that the company will temporarily close two of units for unscheduled maintenance because of the high cost of obtaining benzene feedstock on the spot market.

The company will shut down styrene monomer and phenol units in September and perform unscheduled maintenance for an unspecified period. The styrene monomer plant has a production capacity of 250,000 tons per year, while the phenol unit has a capacity of 400,000 tons per year.

In addition, an aromatics plant will also be shut down in September for an estimated period of 40 days for unscheduled maintenance. This plant has a production capacity of around 350,000 tons per year of benzene.

To further complicate matters, another of FCFC's aromatics plants, with a capacity to produce up to 400,000 tons per year of benzene, was forced to shut down earlier in July because of mechanical problems and is still out of operation. Exactly when the plant will resume production remains unclear.

Not only is the cost of feedstock benzene on the spot market still high--currently just over $842 per ton--but demand for styrene monomer and phenol is also low. If FCFC were to purchase benzene for delivery in September at the current prices, the company would run the risk of operating at a loss.

Estimates of price forecasts for benzene, phenol and styrene monomer do not offer a great deal of comfort to FCFC and other producers in Asia. Currently, prices for benzene in the U.S. are still high, so the forecast is that prices will remain at a relatively high level. Benzene consumption in the U.S. is high as a result of the increased production of expanded styrene, consequently limiting the available supply.

With exports of styrene monomer and phenol from the U.S. to Asia, it is unlikely that the price of these products will increase in the near future. Conversely, prices of incoming supplies are likely to fall further and cause a slowdown in downstream demand.

Benzene is a key raw material in the production of phenol, styrene, and other chemical products. Styrene, in turn, is predominantly used to produce polystyrene in its many forms, such as general purpose, high impact and expanded, the latter being used in the building industry for heat and sound insulation and as a general packaging material.

The price of benzene in Asia has been very volatile for the past two years, ranging from $600 per ton up to $1,200 per ton. With a close connection between prices in the U.S. and Asia, events in the U.S., such as seasonal rises and falls in demand and the hurricane season, have a strong impact on the Asian spot price. As recently as February this year, the price for benzene in the U.S. hit an eight-year low.

FCFC manufactures a range of chemical products, plastics, textiles and fiber products, including acrylonitrile butadiene styrene (ABS) plastics, resins, and synthetic fibers and cloth, both for the domestic and overseas markets.

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