HOUSTON — Since polystyrene was the first commodity plastic to be steamrolled by the ongoing petrochemical downturn, it's only fair that it would be the first to recover.
That's what industry consultant Vince Sinclair thinks will happen. Bob Beil, commercial director for global PS leader Dow Chemical Co. of Midland, Mich., offered one possible scenario that could prove Sinclair right.
Sinclair, with Houston's CMAI Inc., spoke at the CMAI World Petrochemical Conference, while Beil spoke at the DeWitt World Petrochemical Review. Both conferences were held March 24-25 in Houston.
U.S. PS prices began dropping in mid-1995 and, in spite of leveling out somewhat last year, prices still stand well below the 55 cent-per-pound level they had reached before the slide began.
Sinclair believes the North American PS industry has ``turned the corner,'' with both operating rates and prices set to climb. PS producers already have pushed through a 4 cent-per-pound increase in 1999.
North American PS operating rates should begin to rise later this year, but probably won't reach the 90 percent mark until 2001, Sinclair said.
The industry has reached this turning point by taking out more than half a billion pounds of older, less productive capacity since 1996. Nova Chemicals' surprising acquisition of Huntsman Corp.'s PS business last year also streamlined the market, reducing it to five major players.
Sinclair said North American industry consolidation should be done for now. North American PS makers ``don't really need to consolidate anymore,'' he said.
``The market is still growing and operating rates are going higher, which should lead to producer confidence. They won't be biting each other's hands off every five minutes,'' he said.
Beil's rapid-turnaround option calls for traditional PS pricing and production spikes to continue, allowing for profitability and operating rates to improve before 2001.
``Plants will start to run hard and someone will have a production failure,'' Beil said of his first option. ``Operating rates will spike, market psyche will shift and we'll move to a peak.''
In a second scenario, PS will move closer to being a true commodity, allowing for a slower recovery and a lower peak. Whichever scenario happens, Beil said, the industry needs to change the way it looks at its business.
``If our focus is on traditional supply/demand cycles, we're missing the point,'' he said. ``But if we're willing to pursue our own destiny ... if we expect our [research and development] people to find breakthroughs in this 60-year-old polymer ... we can potentially change the future for this industry.
``But if we are content to post our products on the Net, to set our pricing via formulas and to reduce our R&D spending to cut our short-term costs, then we deserve what we get,'' Beil added.