For makers of polycarbonate and polystyrene, North America hasn't been a friendly place lately. And it doesn't look to brighten up any time soon.
PC is expected to grow at an annual rate of less than 3 percent in the region between 2005 and 2010, with operating rates below 80 percent, while annual North American PS demand growth should check in at about 1.5 percent in that period.
Industry consultants Alex Lidback and Peter Feng explained how the materials arrived at their disappointing fates at the Plastics Processors Conference, hosted Aug. 16-17 in Boston by Chemical Market Associates Inc. of Houston.
Essentially, both materials have been hurt by changes in technology and entertainment formats.
The optical media market - including CDs and DVDs - ``has seen its glory days,'' according to Lidback, CMAI's aromatics global practice leader. That segment was a real growth driver for PC in the 1990s, but will be flat to slightly declining in 2006-10.
``Like a lot of people, I haven't bought lot of CDs in the last five years,'' Lidback said. ``I've downloaded music from iTunes and that sort of thing.''
PC demand plummeted between 2001 and 2005, with average North American demand declining almost 2 percent each year during that period. The global PC market is about 6 billion pounds and currently is oversupplied, Lidback explained. Global PC demand was flat in 2005 but should rebound to the 5 percent level in 2006, he said.
The picture is different in northeast Asia, which CMAI said comprises mainland China, Hong Kong, Taiwan, Japan and South Korea. There, demand growth has averaged 16.5 percent in the past five years. Globally, 75 percent of new capacity scheduled to become available by 2010 is in northeast Asia. New capacity also is being added in Saudi Arabia, while North America already has more than enough PC to meet its needs, Lidback said.
U.S. imports of finished goods that use PC also are off. Between 2004 and 2005, finished goods imports were up slightly in TVs and computer monitors, but were down slightly in appliances and tools and down significantly in optical media.
Auto window glazing once was seen as a big opportunity for PC use, but has struggled to take off because of issues involving scratch resistance, Lidback said.
North American selling prices for PC peaked in 2005 and are expected to decrease through 2010. Profit margins also are declining.
``Polycarbonate seems to be becoming a commodity,'' said Lidback. ``In some indications, it's already there. The slowing optical media market has been somewhat of a thorn in its side.''
The story in PS is a similar one, according to Feng, who is CMAI's styrenics director.
``Changes in technological trends don't bode well for polystyrene,'' Feng said. ``TVs with large housings have been replaced by flat screens.
``VHS tapes, audio cassettes and computer diskettes have been replaced by flash memory and electronic downloads. CDs have been replaced by iPods and music downloads, reducing demand for [PS] CD cases.''
Imports of PS tableware and kitchenware into the U.S. had been under $60 million per month in 2002, but have been more than $80 million per month since early 2005. Makers of those products may look to supply outside of the U.S. or get out of the business entirely, he said.
It hasn't helped that costs of benzene - a key chemical used to make PS feedstock styrene monomer - have been through the roof, making PS more expensive while its demand drops.
North American benzene prices averaged $1.12 per gallon from 1986-2003, but soared to an average of $2.88 from 2004 to today. In July, the contract price was $3.87. Poor profit in the late 1990s led to a lack of new supply, which then turned into global tightness.
As a result, Feng said, benzene and ethylene have absorbed almost all profit from the PS value chain. In 2000, PS received 27 percent of the chain's margin. By 2004, the PS share had dropped to 3 percent.
That unsightly profit picture is leading North American firms to reduce the region's PS supply by about 300 million pounds in 2006 and 2007, and Feng said he wouldn't be surprised by additional consolidation.
Globally, PS demand is set to grow 3.3 percent between 2005 and 2010. Feng added that he expects North American PS prices to move up and down with raw-material costs, but to remain relatively high.