HOUSTON — BASF Corp.'s Kevin McQuade might be the new guy on the polystyrene block, but he didn't pull many punches when reviewing the state of the industry at the DeWitt Petrochemical Review in Houston, April 1-2.
Based on a survey of 34 PS processors—not all of whom were BASF customers—McQuade concluded that although the industry has done a good job selling PS, it appears to have lost or forgotten the need to market PS.
``None of the customers we talked to views polystyrene with any excitement or ideas about what they could do with it to create new uses and increased demand, even at today's low prices,'' said McQuade, who took over as BASF's PS marketing and sales director earlier this year. ``The fact that our material is seen as undervalued suggests that it is also undermarketed.''
The undermarketing of PS may have resulted from budget pressures, which resulted in downsizing and cutbacks in applications research, product development and product promotion in the early 1990s, McQuade said.
BASF of Mount Olive, N.J., is North America's third-largest PS maker with 1.1 billion pounds of capacity.
Strong demand growth — evidenced by the 6.8 percent sales jump PS enjoyed in North America last year — also may have suggested that market development was no longer necessary, he said.
The low prices McQuade referred to had cut margins close to the bone until a successful 3 cent price increase recently gave producers some breathing room. This margin squeeze influenced BASF and Huntsman Corp. of Salt Lake City in their decisions to close a combined 300 million pounds of capacity late last year.
Thermoplastic growth rates from 1992-97 reflect this lack of marketing attention. During that period, PS grew only 20 percent, far below growth rates for polyethylene, polypropylene, PVC and engineering resins.
Highlights of McQuade's customer survey included:
63 percent of respondents said low prices were not creating demand, in spite of historical trends.
67 percent said they weren't using the low price of PS as an opportunity to replace more-expensive materials.
70 percent said higher PS prices would have no effect on demand.
However, McQuade didn't simply remind the PS industry how gloomy things have been; he was sure to offer a solution. He contends that the PS industry ``must rediscover market development in all of its forms.''
``If we don't actually bring to our customers some ideas and even solutions they hadn't thought of themselves, then there's no reason we should expect our customers to take the initiative and bear the cost of targeting new applications for polystyrene,'' McQuade said.
McQuade also presented his business overview projecting global PS consumption to rise 4 percent in 1998 and 6.5 percent annually in 1999 and 2000.
This consumption, however, will be more than matched by 8 percent global capacity growth in 1998 and a similar capacity jump in the 1999-2000 period. In North America, PS growth should hit 3.4 percent in 1999-2002.
Operating rates slipped to 83 percent last year, should climb to 88 percent in 1998 because of the capacity shutdowns and could be as high as 93 percent by the end of 2002, he said.