HOUSTON — Challenges facing the North American polystyrene market aren't going away any time soon, with one industry analyst suggesting PS may be on the downside of its life cycle.
Producers are encountering strong resistance to 3 cent-per-pound price increases an-nounced for March 1, but the industry's problems run deeper than that, according to Chemical Market Associates Inc. analyst Alex Lidback, who spoke at his firm's World Petrochemical Conference in Houston.
After suggesting PS is on the downside of its life cycle, Lidback pointed out the industry could travel one of two paths. The first would lead to a continued slowing trend in demand growth, while the second would be a revival based on new applications and performance features.
But Lidback added that industry consolidation — which has reduced the number of major players in North America to five — means that fewer companies are working on applications that could lead to a revival.
There are about three times that many linear low density polyethylene and polypropylene producers in the United States alone "feverishly working to find new products their resin can be used for — including products traditionally held by polystyrene," he said.
Stan Weber, PS general manager for Houston-based Chevron Phillips Chemical Co. LP, acknowledged that the PS industry is running uphill, especially against lower-priced PP.
Since 1980, PS demand has dropped every time the spread between PS and PP prices widened, Weber said at Dewitt & Co.'s World Petrochemical Review in Houston. For example, with PS priced an average of 16 cents per pound higher than PP in 1999, PS demand checked in at 4 percent less than gross domestic product growth.
PS makers could have some leverage in 2001, since customer inventories were reduced drastically in late 2000, leaving them with little material on hand, according to Weber. Overall, U.S. PS sales dropped almost 4 percent in 2000, a figure that is all the more striking in light of the strong sales posted in the first half of the year.
Weber positions U.S. PS growth at around 3 percent for 2001-02, while Lidback sees it checking in closer to 2 percent. Weber also foresees operating rates of around 89 percent in that period, while Lidback expects them to be closer to 85 percent.
Weber also is concerned that Philadelphia-based Atofina Chemicals Inc.'s planned addition of 500 million pounds of capacity in Carville, La., next year might arrive before it is needed. Chevron Phillips has no plans to expand its Marietta, Ohio, PS plant until 2005 at the earliest.
The digital versatile disc market is a case where PS has lost an opportunity, Lidback said. Most DVD cases are made of PP, whereas most compact disc, CD-ROM and recordable-CD cases have been made of PS. The PP DVD cases are larger than traditional CD cases, but may cost the same or even a bit less. The larger PP cases also offer more aesthetic opportunities to DVD makers, according to Lidback.
One ray of hope for PS comes in its expanded PS segment. Lidback expects EPS, which accounted for 15 percent of all U.S. PS sales last year, to grow at a 3.5 percent clip in 2001-02.