Industry Market Trends
The Pressure Is On for Styrenic Polymer -- and Not Just Prices
January 23, 2014
Prices for styrene and polystyrene (PS) resin are expected to rise due to constraints on feedstock supplies even though the demand outlook for both is relatively weak. The two biggest global suppliers, Americas Styrenics and Styrolution, both announced 3-cent-per-pound increases for polystyrene on Jan. 1, citing higher benzene and styrene costs. PS prices went up 3 to 4 cents per pound in the second half of last year. Prices for the commodity plastic have been on an upward trajectory since 2003, when they were around 50 cents per pound. Current prices for crystal-injection-grade PS are pushing $1.20 per pound for high-volume, contract buyers. High-heat and impact grades are slightly higher. In that same time period (2003-2013), global demand for polystyrene has dropped from more than 11 million metric tons to about 10.5 million metric tons. "Pricing is driven by feedstocks," said Priya Ravindranath, a principal analyst for IHS. The North American contract price for benzene has risen about 70 percent since 2003. Output of benzene from the two most important sources in North America - pyrolysis gas from production of olefins and reformate from refineries - have dropped and will continue to drop, according to a forecast from IHS. Imports are rising to fill the gap, from 1.7 million metric tons in 2013 to 2.1 million metric tons in 2018. Declining American supplies of benzene are tied in part to increasing use of lighter natural gas feedstocks generated by the shale gas revolution. What's good for ethylene and polyethylene is not good for benzene, styrene, polystyrene, and acrylonitrile-butadiene styrene (ABS). READ ON MY PURCHASING CENTER: Sourcing with Cross-Functional Teams Challenges Leadership Skills And that will keep pressure on polystyrene prices even though there is a substantial amount of excess capacity in developed nations. North American operating capacities are in the mid-70 percent range. Demand is suffering as municipalities such as San Jose, Calif., and New York City ban polystyrene foam, and fast food giants like McDonald's continue a transition to paper-based packaging. "Polystyrene foam is a plague on the environment," the New York Times Editorial Board wrote last November. Christine Quinn, former New York City Council Speaker, called the material "worse than cockroaches." Research dating back 10 years has shown that plastic foam products have less environmental impact when the entire supply chain is considered. But chlorine in the Great Lakes and pollution in forests are less visible than foam cups in Times Square. Under pressure from the PS industry, the New York City Council agreed to delay the ban for a year to test a recycling program promoted by Dart Container and the American Chemistry Council. "While it is clear that this legislation singles out and unfairly maligns a quality, cost-effective, and safe line of products, we are suspending further opposition as we believe it is in the best interests of all parties that we turn our attention to successfully passing the recycling test," said Michael Westerfield, Dart's director of recycling programs. Polystyrene foam recycling programs have had some bumps. For example, McDonald's was at one time an avid sponsor of plastic foam recycling, but the food giant couldn't beat City Hall and is now using paper to hold coffee and Big Macs. Packaging represents more than a third of global demand for polystyrene. The next biggest markets are electronics/appliances, consumer products, and building/construction. Another major factor affecting growth of polystyrene in developed regions is substitution by other plastics, particularly polypropylene and polyethylene terephthalate (PET), both of which benefit from shale gas economics, according to a new report by GBI Research, which focuses on the demand side of the global styrene industry. Most of the increasing demand for styrenic derivatives will be coming from the Asia-Pacific region, according to GBI. Most of the new production capacity will also be located there. The biggest styrenics players in the U.S. and Europe have spun off assets and are putting more focus on specialty PS with stronger growth prospects than standard grades of polystyrene. Americas Styrenics, in Woodlands, Texas, was created in 2008 as a joint venture equally owned by Styron (a Dow Chemical spinoff) and Chevron Phillips Chemical Co. Styrolution, based in Frankfurt, Germany, was formed in 2011 as a joint venture between BASF and INEOS. Styrolution is restructuring production facilities in Germany, and at the major plastics industry fair K2013 showed interesting research in medical PS grades that could potentially replace polyvinyl chloride (PVC). Greater penetration in automotive and electronics markets with specialty grades is also targeted. Meanwhile, work is under way to develop substitutes for polystyrene foam packaging made from bioplastics. Foamed polylactic acid (PLA) is a leading candidate. Researchers at Case Western Reserve University in Cleveland, Ohio, developed a styrene foam replacement made from milk proteins and clay. The bottom line for buyers may be that it's a good time for value analysis programs looking at the potential for replacement of styrenics with plastics that are benefiting from the shale gas revolution: polyethylene, polypropylene, and PET. The economics are improving for those olefinic plastics and so is the environmental picture as major OEMs such as automakers boost their use in hopes of improving the viability of commercial recycling. READ ON MY PURCHASING CENTER: Procurement Changes in Past 10 Years This article was originally published at My Purchasing Center and has been republished with permission. For more stories, visit MyPurchasingCenter.com.