North American polystyrene makers are trying to stop recent price declines with a new round of price increases.
Dow Chemical Co. and other PS makers are working to implement 3 cent-per-pound price moves that were to be effective Jan. 2. In a recent news release, Dow's Howard Ungerleider said the move was needed because of tightening supply/demand balances caused by recent plant closures, industry restructuring and depleted inventory levels. Ungerleider is commercial vice president of basic plastics in North America for Midland, Mich.-based Dow.
Dow has played a role in recent market changes by closing a 300 million-pound-capacity PS plant in Sarnia, Ontario, in mid-December. A 220 million-pound-capacity low density polyethylene plant was closed there as well.
Closing the PS operations in Sarnia was a bittersweet moment for Dow, according to Dow North American PS business director Jeff Denton, since the firm had produced the material there for more than 50 years.
In a Dec. 14 phone interview, Denton said the removal of capacity was ``the right thing to do for the North American market.''
Earlier in 2006, Dow took its 275 million-pound-capacity plant in Joliet, Ill., off-line for two weeks of maintenance work. The firm kept Joliet closed for two additional weeks because of weak market demand.
In addition to Dow's 2006 moves, Nova Chemicals Corp. of Pittsburgh closed a plant in Chesapeake, Va., with 300 million pounds of annual PS capacity and 170 million pounds of annual capacity for styrenic compounds.
Average North American selling prices for solid PS have dropped at least 6 cents per pound since Oct. 1. For much of 2006, North American market demand had been 2-3 percent lower than 2005 levels.
The North American PS market has been rocked in recent years by high prices for benzene, the chemical feedstock needed to make PS precursor styrene monomer. Benzene - which accounts for about 75 percent of the cost of PS - had been priced at less than $1 per gallon for most of the 1990s, but soared earlier this decade and remain above $3 per gallon.
As a result, lower-priced commodity resins, such as polypropylene and PET, have been able to poach applications previously owned by PS.
Dow and Nova are tied for the top spot among North American PS makers based on estimated 2006 sales, with each having a 22 percent market share, according to Houston's Chemical Market Associates Inc. consulting firm. Globally, Dow leads all PS makers with a market share of 13 percent of global capacity.
Current U.S. operating rates for PS are estimated at about 75 percent. In the first nine months of 2006, packaging and one-time use applications accounted for about 52 percent of the U.S./Canadian PS market, according to the American Chemistry Council in Arlington, Va.
``Food-service and electrical/ electronic uses [for PS] have been down in 2006,'' Denton said. ``But food-packaging uses have been up.''