Dow Chemical Co. and Styron LLC are moving forward as separate firms, but they still share connections in the styrenics market.
Midland, Mich.-based Dow sold Styron its market-leading styrenics business, which ranks as the world's largest polystyrene maker to private equity firm Bain Capital LLC last year for $1.6 billion. But the two firms still interact in numerous ways. Dow now is a sizable styrene monomer customer for Berwyn, Pa.-based Styron, while Styron buys butadiene feedstock from Dow for some of its products.
Officials with both firms talked about those and other changes at DeWitt & Co.'s World Petrochemical Conference, held March 23-24 in Houston.
The sale of Styron was disheartening, but it made strategic sense, said Dow global aromatics business director Andrew Jones. Jones had to cope with the sale and the closing of a longtime styrenics production site in Freeport, Texas, shortly after being promoted to a top styrenics job last year.
Dow's involvement with the styrenics market is a lengthy one that's inseparable from the history of the 115-year-old firm. Dow chemists first made industrial styrene in the 1930s, and Styron-brand PS became Dow's first commercial plastic material in 1938. In the ensuing years, PS was at times Dow's largest business, accounting for as much as half of the firm's global profit.
Dow then introduced Styrofoam-brand PS foam in 1949 and commercialized ABS, styrene acrylonitrile, expanded PS and styrene butadiene latex throughout the 1940s and 1950s. During World War II, Dow added plants in Canada, Texas and California to make styrene butadiene rubber for the U.S. war effort. Those plants later made PS and other styrenic products.
By 2000, Dow was the world's largest maker of styrene monomer feedstock. But then, as Jones described it, the party stopped. Higher prices and new technologies DVDs replacing PS videocassettes, MP3s and iPods replacing PS CD cases and PS-heavy TV housings replaced by flat-screens led to slowing PS demand.
PS ceased to be a cheap plastic, and interpolymer substitution happened, Jones said.
Paper replaced PS in some food packaging because its price didn't go up. The [PS] industry was slow to react to changes in fundamentals.
Excess capacity caused more than 4 billion pounds of excess capacity for PS and other styrene derivatives to close down between 2005 and 2009.
Dow also reacted by placing its North American PS unit into a joint venture with that of Chevron Phillips Chemical Co. That venture now operates as Americas Styrenics.
Dow retains ownership stakes in a pair of styrene-making joint ventures in Asia, as well as a 7.5 percent stake in Styron. Jones said the styrene story was integral to the growth of Dow, and that story will remain an exciting and illustrious one.
At Styron, the firm still has technical expertise, global reach and a unique product portfolio, but now is able to do things it wasn't able to do inside of Dow, according to Jeff Denton, a Dow veteran now with the new firm as vice president of feedstocks and corporate services.
Styron's market outlook is providing Denton and others with reason for optimism. The $5 billion firm has a lot of opportunities to grow organically, and a lack of new styrene capacity globally should help that material remain profitable, he said.
Global demand for PS and other styrene derivatives is expected to grow around 3 percent to 2014, although Denton said that rate could be even higher. World styrene operating rates are expected to be above 90 percent by 2013, which could result in a tight market.
That's not something we could say a lot of in the last 10 years, Denton said.
Denton declined to comment on recent published rumors that Bain already is planning an initial public offering of Styron. But he did point out that Boston-based Bain has delivered significant value with its other chemical acquisitions.
Recent butadiene shortages have been a concern for Styron and other users of that feedstock, but Denton said his firm has a strong supply position with Dow, and many other contracts in the marketplace as well.
Denton added that Styron also could benefit from higher prices for polypropylene resin, which had taken some applications away from PS in the 2000s. Higher prices for propylene monomer feedstock now have PS and PP closer to parity in many parts of the world.
Overall, the picture looks better for PS, styrene and related products than it did just a few years ago.
Mature markets have repositioned themselves and are on the rebound, Denton said. And emerging markets are growing and present a big upside.