North American PS makers took a big bounce off of a desolate bottom in 2002. Through July, U.S./Canadian sales were up 11 percent. Average per-pound selling prices for injection-grade crystal PS also were up 28 percent through September.
Total 2002 growth should clock in at 6-8 percent and revert to a more typical 3-4 percent in 2003, according to Jeff Denton, PS business director for market leader Dow.
``The demand surge was timely, since PS prices were down in the first quarter as much as they were at any time in history,'' Denton said. ``When you see the fundamentals that PS works with, you realize that margins haven't improved much at all.''
Styrene monomer was a familiar culprit in limiting PS margin growth in 2002.
``In polystyrene, you need to talk about monomer,'' said John Siegrist, styrenics vice president for Nova Chemicals Corp. of Pittsburgh. ``You can move it around globally, so there's a number of monomer uses chasing 58 billion pounds of capacity.
``In 2002, planned and unplanned styrene outages affected the ability to produce derivatives like PS,'' he added. ``And there are minimal capacity expansions planned in monomer in the next couple of years.''
Prices for PS feedstock benzene also were up substantially in 2002, putting further pressure on PS makers.
With no major capacity events set for North America in 2003, Dow's Denton said he expects the supply/demand balance to be ``snug to balanced.''
``The appliance market is still strong thanks to items like refrigerator liners. It was stronger earlier in the year before business corruption and the threat of war began to affect the core business,'' Denton said. ``There's still some ABS replacement going on.''
Siegrist has hopes for food service, the largest single PS end market, which he said ``has held up very well.'' Sales of PS into food service were up more than 9 percent through July, according to APC.
``Even if people are spending more time at home [because of the economy], they're still using more plastics,'' Siegrist said. ``They'll swing by and get some takeout - since more restaurants are offering takeout menus - and bring it home to reheat.''
Siegrist added that the consumer electronics market ``has survived'' for PS - ``We haven't lost any ground in TV monitors and housings'' - and that Nova is expanding PS applications for containers that can go directly from freezers to microwave ovens.
PS operating rates should start the year in the low 80s, but could move close to 90 percent as 2003 wears on.
After an extremely rough 2001, the North American PC market regained some vitality in 2002, but still fell short of its high-flying days of the past decade.
``We've seen some improvement globally,'' said John Dineen, vice president and general manager of Lexan-brand PC for market leader GE Plastics of Pittsfield, Mass. ``Asia's very healthy and the U.S. is reasonable after being down tremendously in 2001.''
``The business equipment sector has improved, but automotive has been tough to call,'' he added. ``Growth in DVD and recordable CDs has been taking business from CD-ROMs.''
``The DVD market is increasing very rapidly and CD-R is continuing growth, although standard CDs are staying flat,'' said Azita Owlia, consumer market vice president for Bayer Corp. of Pittsburgh. ``The economy hasn't picked up to the level we'd hoped for, but we're still pretty optimistic.''
Owlia pegged 2002 North American growth at 6 percent, while Ben Smith, an industry analyst with Chemical Market Associates Inc. in Houston, sees the year finishing with 5-7 percent growth. Smith is even more enthusiastic for 2003, where he anticipates growth of 10-12 percent as the region's economy comes out of a recession, leading to increased spending on information technology.
Computers and telecommunications also could benefit from new advances in microchip technology, Smith added.
Capacitywise, GE completed a major expansion in Burkville, Ala., in 2002 and plans to open its second plant in Cartagena, Spain, in the second half of 2003
Dineen saw last year's slowdown as an opportunity for innovation and new applications, including telecommunications uses for GE's Solex-brand PC film. PC uses also could rise in automotive rear and side windshields, he said.
Owlia added that lower-priced recordable DVDs could begin to hit the market next year, giving that sector a big lift, But Smith cautioned that DVDs could be a victim of their own success.
``DVD has been doing well, but there's oversupply and too much capacity which could lead prices to collapse,'' he said.
He added that producers should not look at recent pushes into product differentiation via color and other methods as a cure-all.
``[PC makers] have tried to differentiate to make products special, but mostly this has been in lower-volume applications,'' he said. ``The whole market's not going to switch to blue CDs.''
Availability of phenol feedstocks could affect the 2003 PC market in light of a recent explosion that knocked out a major phenol plant operated by Ineos Group in Mobile, Ala. The 880 million-pound-capacity plant represented 5 percent of total world capacity and is out of commission until at least January.
``The phenol situation could cause global tightness for that material and affect PC capacity.'' Owlia said. It's too early to say what impact it will have in 2003 and 2004, but spot market prices [for phenol] are already skyrocketing.''
Numerous price hikes failed to tick in 2002, but GE's Dineen said North American producers should remain profitable in 2003, with operating rates of 80-90 percent.
North American nylon resin growth looks to be steady but not spectacular in 2002 and on into 2003.
``We should be up about 5 percent on the year, primarily because of growth in auto production which has used up more under-the-hood parts made of nylon,'' said Dave Flitman, North American business director for nylon leader DuPont Co. of Wilmington. ``Growth has come back but there hasn't been more market penetration.
``We're hopeful of gains in automotive-based electrical/electronic uses like sensors in 2003,'' he said. We're also expecting growth in parts for power tools and kitchen ovens, like handles and knobs.''
Global marketing director Lance Altizer of Honeywell Plastics in Morristown, N.J., characterized nylon's flexible packaging market as ``really strong,'' especially in meat and cheese food packaging.
``Film has been strong in everything from rigid containers to stand-up pouches, which are using more sophisticated multilayer nylon films.''
He added that although resin capacity utilization rates are up, price increase efforts are dampened by excess compounding capacity and a large number of smaller compounders that keep pricing highly competitive.
The building and construction market has been strong for nylon, as a decline in commercial building has been offset by a rise in residential work, he said.
Altizer said he is somewhat concerned about the shift of production of electrical/electronics parts and power equipment from North America to Asia - a factor that will affect North American nylon resin consumption.
``We knew it would happen, but more of it happened in 2002 than we expected,'' he said. ``That could be a result of greater pressure from `big box' retailers.''
But with nylon, all roads lead back to the automotive market, which accounts for roughly 40 percent of all nylon resin uses.
``The economy has led automakers to reduce their design cycles, which could lead to material change,'' Altizer said. ``They're fast-tracking new applications because of the cost pressure they're under.
``Automotive continues to provide really good opportunities for metal-to-plastic conversion in structural components, under-hood and front-end parts. That's the bread and butter of nylon.''
ABS has managed to fend off competing materials and post growth of 8-10 percent in 2002, but 2003 could hold a return to more traditional low single-digit growth.
``We've seen a good recovery in 2002 after a weak 2001,'' said Joe Bluell, ABS business director for market leader GE Plastics. ``All sectors were solid, especially building and construction, which includes fencing, roofing and decking.''
In decking, ABS has seen ``a huge push'' as a core layer because of its weatherability, Bluell said. Other extrusion-based growth areas for ABS include multilayer sheet in marine vehicles, tractor hoods and similar applications.
Global ABS supply remains long, even as price increases on its three core ingredients have put pressure on margins. On average, ABS makers won 4 cents per pound out of 11 cents nominated to date in 2002. Another 5 cent increase is pending.
But in some respects, ABS still has its work cut out for it, said Alex Lidback, an industry analyst with CMAI.
``If you're looking for performance, ABS is great,'' Lidback said. ``But it's an expensive resin to go into the one-time uses that polypropylene and polystyrene are going into.''
Thermoplastic elastomer makers are banking on customers finding value in their high-end products and not being deterred by high per-pound selling prices in the year ahead.
Robert Liskiewicz, automotive industry manager for Advanced Elastomer Systems LP of Akron, Ohio, tags the overall thermoplastic vulcanizate market at 6-7 percent growth in 2003, with a growth rate of 8-10 percent for the TPV sector that AES calls home.
Faisal Syed, an industry analyst with CMAI, expects five-year annual growth rates of 7 percent for TPOs, 5 percent for styrenic block copolymers, 4.5 percent for copolyesters and 4 percent for thermoplastic polyurethanes.
``We saw double-digit growth in 2002 as inventory levels dropped and the pipeline needed replenishing,'' Liskiewicz said. ``Auto production is up and we've got several weatherseal programs going there, as well as new work in consumer applications like bottle cap closures.''
AES also has noticed a stronger trend toward design in the last year, leading it to work closely with color compounders to optimize its color range, he added.
At SBC maker Kraton Polymers of Houston, G-brand global director Garret Davies is looking for a return to double-digit growth in 2003 after a disappointing 2002.
``We haven't seen North American industry bounce back like we thought it would,'' he said. ``Auto's been OK because of underlying demand, but our customers have seen how their own customers have behaved and that's led to more volatility in orders than in the past. We believe the [low-growth] situation we're seeing right now is a short-term thing.''
Growth areas for Kraton include auto weatherstripping and food-wrap packaging, where SBCs can serve as an alternate material or a compliment to PVC and ethylene propylene diene monomer, Davies added.
EPDM also looms large for AES, since ExxonMobil Corp.'s recent decision to buy out AES partner Solutia Inc. will allow AES to market its TPV products in conjunction with ExxonMobil's EPDM line.
``We're looking to have an enhanced portfolio of products when combined with ExxonMobil's EPDM business,'' Liskiewicz said. ``Up until now, AES and ExxonMobil didn't work together. Now we can sit down together with designers instead of each of us pushing our own materials.''
Kraton plans on adding new capacity in Belpre, Ohio, and Berre, France, by mid-2004. AES reports adequate capacity and debottlenecking opportunities at its plants in Ohio, Florida and Wales.
Overall, Syed depicted 2002 as ``healthier, but it still needs to land critical applications in automotive'' to ensure long-term success. He pointed out that other markets like wire and cable ``aren't at base-load levels right now.'' In some regions and markets, TPE penetration has been helped by mandated PVC replacements, Syed added.