WASHINGTON—Polystyrene should remain more of a buyers' market and profit margins for resin producers are likely to remain tight until 2002 or 2003, analysts told a Washington seminar Nov. 17.
The margins for even the most-efficient resin manufacturers will not pay for investment until then, but prices should start to recover and remain strong until the middle of the next decade, said James Virosco, a principal at consultant Chem Systems.
Virosco and Paul Ita, a senior research analyst for Freedonia Group Inc. in Cleveland, spoke at the Polystyrene Global Forecast, sponsored by the Polystyrene Packaging Council, a unit of the Washington-based Society of the Plastics Industry Inc.
``1997 was not a good year for margins,'' Virosco said. ``The margins are going to be difficult in the business until 2002 or 2003.''
Ita said that projection could be optimistic, given the excess capacity in Asia and significant expansions planned by the Chinese.
``That will hammer prices,'' said Ita, who wrote a July study on global PS demand, but said pricing is not his specialty.
Virosco projects PS demand will grow at a 3.4 percent annual rate in the United States between 1997 and 2005, fed by strong demand in packaging, electronics and expanded PS.
In Europe, PS demand will grow 2.9 percent a year, fed by profile extrusion and insulation for construction, he said.
The economic crisis in Asia clearly has slowed demand, but Virosco said that PS thus far has ``escaped a lot of the worst of the Asian crisis'' because it is used in products that largely are exported. PVC is the polymer most affected by the Asian crisis, Virosco said.
Prospects for Asia depend very much on how China continues to grow, Ita said. China is projected to boost PS consumption 6.6 percent a year until 2002. That figure is down from an average growth rate of 10.3 percent from 1987-97, but it still represents strong growth, he said.
Ita projected 1.5 percent annual growth in demand in Japan, while worldwide demand is projected to grow 3.4 percent a year.
PS will have the slowest growth of any of the major thermoplastic resin, at 3.4 percent a year to 2002, because of intense competition from ABS, nylon and other engineered plastics in durable goods, and PE and PP in packaging and serviceware, he said. Paperboard also is taking some niche markets back from PS, according to Ita.