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Increasing demand for household appliances to support Styrene demand in China
In March 2024, the Chinese government offered incentives to motivate its citizens to replace their old home appliances with new ones, indirectly propping up styrene demand, a key input to many white goods appliances.
This “cash-for-clunkers” approach is one of many measures the government has taken to offset the housing market downturn and spur consumption as well as manufacturing activity in the country. The policy provides subsidies of up to 2,000 yuan ($280) per item.
Sales revenue from home appliances under the policy-backed trade-in programme reached 201.97bn yuan ($28bn) as of 8 December 2024, data from the Ministry of Commerce show. 29.64mn customers have benefited from subsidies on their home appliance purchases, leading to a sales increase of 45.85mn units, the ministry also said.
Subsidies for new energy-efficient appliances, such as washing machines, TVs, air conditioners, refrigerators and water heaters, will be 15pc of the sales price, as stated by the National Development and Reform Commission. As these appliances include styrene in their assembly, their sales serve as an indicator of styrene demand.
China holds the largest share of the styrene market, accounting for almost one-third of global styrene monomer (SM) demand. Until recently, China was a net SM importer because its consumption, around 12mn t, exceeded its production capacity.
Styrene is mainly used in the production of expandable polystyrene, polystyrene, acrylonitrile-butadiene-styrene (ABS), styrene-butadiene latex, and styrenic block copolymers. Polystyrene is then used to create kitchen appliances, rigid containers for food service and other moulded products. ABS is used to make wheel covers, automotive frames, and enclosures.
This increase in styrene demand coincided with a tight SM supply situation in the last quarter of 2024, due to a lack of spot cargoes from Southeast Asia with Shell having likely shut one of its Propylene Oxide/Styrene Monomer (POSM) units in November. Moreover, Zhejiang Petrochemical took maintenance shutdown of its three ethylbenzene styrene monomer (EBSM) plants, for a total capacity of 2.4mn t during the fourth quarter, leading to a supply loss of around 250,000t of styrene.
The impact of this trade-in policy coupled with the temporary supply tightness is clearly illustrated by the styrene-benzene (SM-BZ) spread which has been steadily rising since March, reaching a value of $158/t by October. This translated to a 68pc increase from March. The spread directly impacts the profitability of producing SM. For context, the average annual spread in 2023 and 2024 was $135/t and $123/t respectively. However, we need to bear in mind that once these facilities come back online, the overall spreads would start to taper down.
Looking ahead, consumer spending during Lunar New Year celebrations along with extensions of China’s trade-in program and other stimulus measures should provide continued support to styrene’s uptrend. Additionally, the upcoming March-June quarter often sees higher demand and increased production to meet the demand for end-products like insulation, packaging, and consumer electronics, aligning with seasonal construction trends. With benzene prices expected to remain relatively steady and prospects of improving downstream demand, the SM-BZ spread would remain supported in 2025.
Over the long-term, China is witnessing a marked slowdown in benzene (BZ) capacity expansion in part because most crude-oil-to-chemicals (COTC) based projects are commissioned or are nearing completion. Outside of China, hardly any growth is expected in benzene capacity in the region. Some of the key projects commissioned in the last few years include Hengli with benzene capacities at 1.5mn t, the Zhejiang complex with capacity to produce 3mn t of benzene and Shenghong Petrochemical with capacity of 550,000t. As for styrene, Argus Benzene Analytics sees a marked slowdown in capacity expansion after 2025 in China which would suggest the supply-demand scenario would become more balanced, thus supporting an elevated SM-BZ spread.
Argus regularly evaluates import and export trends in the Argus Benzene Outlook and Argus Benzene Analytics.
Author: Santosh Navada
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