HOUSTON - Demand for polystyrene increased 9 percent in 1994 and is expected to grow at a similarly strong rate through 1995. Because PS demand tracks the economy very closely, so does pricing for the resin, industry executives said at recent conferences in Houston. Therefore, processors can expect continued upward pressure on prices for the foreseeable future.
``The main driver of polystyrene pricing and profitability is the supply and demand balance of both styrene monomer and polystyrene,'' according to Bob Ray, global business manager for styrenics and engineering thermoplastics for Dow Chemical Co. of Midland, Mich.
Dow is the world's largest producer of PS.
Ray said the value of PS resins does not affect prices for PS products, pointing to the relative stability in prices for PS finished goods during the past 10 years, and comparing those prices to the violent fluctuations in prices for PS resins during the same period.
However, he noted, while the growth rate for PS resins has averaged 4.7 percent since 1981, that span has been marked by periods of intense growth - at rates above 8 percent a year - that were offset by periods of no or negative growth.
Ray spoke March 23 at CMAI's1995 World Petrochemical Conference in Houston.
In a separate speech March 22 at the Dewitt Petrochemical Conference in Houston, Dominic DeSimini, business segment leader for PS resins for Novacor Chemical Inc. of Leominster, Mass., provided a formula for tracking the growth and demand for PS resins.
``Strong economic growth of 4 percent or higher typically will lead to a PS growth of two to three times that rate,'' he said.
That part of DeSimini's formula was borne out in 1994: The U.S. economy grew 4 percent, according to the Federal Reserve Bank, while PS demand grew 9 percent.
``Less-robust economic growth of 3-4 percent will lead to PS demand growth of 11/2 times gross domestic product,'' DeSimini said. ``Average economic growth of 2-3 percent will usually result in PS growth rate of zero to 5 percent, while economic growth of lower than 2 percent per year will result in negative demand growth for PS.''
Since economists are predicting 3 percent growth in the 1995 U.S. GDP, and 2.5 percent a year from 1995-2000, DeSimini said he believes PS demand will increase 3-4 percent per year.
Ray said historic supply and demand data lead him to forecast that PS producers will have a capacity utilization rate of 89-90 percent in 1995 and 1996, but that production capacity utilization rates will deteriorate slightly in 1997 and 1998, as new capacity is put into production. He expects rates to exceed 90 percent in 1999 and 2000.
DeSimini believes those high utilization rates will be one factor in keeping upward pressure on pricing for PS resins.
Both DeSimini and Ray expect that higher prices will continue to jeopardize the uses of PS in applications in which other materials - especially polypropylene - might be substituted.
DeSimini added that he sees the traditional split between the uses of impact grades of PS, crystal PS and expanded PS remaining the same during the next five years, with impact grades accounting for about 55 percent of demand, crystal PS for about 45 percent and EPS for roughly 10 percent.