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Market participants on Thursday applauded Dow Chemical’s plan to close its remaining styrene unit in Freeport, Texas, adding that the move would help balance the US styrene supply picture.
“This was definitely needed,” said a US producer who echoed one trader’s viewpoint that “someone had to bite the bullet”.
The decision to close the styrene plant by the end of the year would help tighten an oversupplied market and improve the remaining producers’ margins, sources said.
Dow would not confirm the capacity of the unit, but said industry reports had listed the unit with a capacity of 460,000 tonnes/year. Global business director Brian Ames said a smaller production unit at the same site was closed in the 2008 fourth quarter.
Participants speculated that a supply contract, which Dow said it secured for the remainder of its styrenics businesses, was likely made with Lyondell and not joint venture Americas Styrenics. Dow would not divuldge the supplier.
A source said Americas Styrenics did not have sufficient capacity for a long-term supply contract.
LyondellBasell and Americas Styrenics did not immediately respond to requests for comment.
Another question among market participants was what might happen with Latin American demand now that those buyers’ traditional source at Freeport was closing.
“That is going to be very interesting,” a trader said, adding that any outcome would be a boon for US sellers.
“Mexico, Venezuela, Colombia and even Brazil will now be scrambling because they used to [get styrene from] Freeport but will now have to seek it in Houston and elsewhere,” a US producer said.
“We were very thankful to be able to ship to Europe and Asia this year,” the producer added. “If we had not had those opportunities then it wouldn’t just be Freeport closing this year. We may be getting lucky here and that [arbitrage] may stay open awhile longer with the loss of capacity at Freeport.”
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