HOUSTON (April 5, 11 a.m. EDT) — The North American polystyrene market isn't for the faint of heart. So Kevin McQuade, PS business director for BASF Corp., must have a pretty good ticker.
McQuade outlined the challenges facing the market — and why there's hope for the future — at the DeWitt World Petrochemical Review, held March 24-25 in Houston.
U.S./Canadian PS demand essentially has been stagnant since 1998, McQuade said. The loss of injection molding business to Asia has hurt the market, as has an increase in imports of PS cutlery and cups and competition from polypropylene and PET. Although extrusion-based PS uses have grown by 700 million pounds since 2001, molding demand has dropped by a similar amount.
The global PS market also is out of balance, with operating rates only at 79 percent, according to McQuade. PS margins have decreased about 9 cents per pound during the past decade, as selling prices haven't kept up with increased raw material costs. Customers often aren't able to pass price increases on to their retail customers.
“The low prices we end up enjoying on the weekend when we're doing our shopping end up being a problem for us in the work week,” McQuade said. “It's a double-edged sword.”
But 2004 looks to be a bit of a comeback year, with Mount Olive, N.J.-based BASF expecting U.S./ Canadian sales to be up 2-2½ percent after posting a loss of almost 4 percent in 2003. Increased 2004 demand already has enabled producers to implement increases of 8 cents per pound in 2004.
The Mexican market appears even more promising. McQuade said PS sales increases there should be 3-3½ percent, thanks to growth in the large-appliance market. Appliance makers Electrolux, Maytag and Whirlpool each have opened plants in Mexico in recent years, he said.
BASF also is working to improve PS performance vs. PET by combining PS with the firm's Styrolux-brand styrenic block copolymer.
“Polystyrene is still an excellent material,” McQuade said. “It's got the best economics of any clear resin in the market and it processes better than many polymers. But we have to rebuild margin and continue to invest in product development.”
Alex Lidback, an analyst with Chemical Market Associates Inc. of Houston, pointed out that the high cost of benzene, used to make PS feedstock styrene monomer, is eating into PS margins. At the same time, high PS costs are discouraging PS processors from building inventories.
The market should experience some cost relief in the second half of 2004, which should allow prices to fall and might stimulate demand, Lidback said at the CMAI World Petrochemical Conference, held March 24-25 in Houston.