A rocky road could lie ahead for polystyrene and several engineering resins because of high prices and excess capacity.
That's the outlook from IHS Chemical market analysts Priya Ravindranath and Paul Blanchard. Both spoke at a Plastics Processors Conference hosted by their firm Oct. 24-25 in Chicago. Ravindrantah is senior analyst of engineering plastics and PS for the Houston-based firm. Blanchard serves as its engineering plastics director.
Global PS demand growth is expected to remain around 2-3 percent annually in the near future, Ravindrantah said. Demand in China will be slightly higher at 4-5 percent.
Global PS operating rates should remain around 70 percent from 2012-17 because of excess capacity, but North American PS operating rates will be higher at around 80 percent. That's because North American PS makers already have taken steps to reduce capacity in the region, Ravindranath said.
North American PS makers removed more than 2 billion pounds of capacity from the region between 2005 and 2011, leaving it with about 5.6 billion pounds of annual PS capacity. Producers of PS in North America “now are more focused on margin improvement than market share,” Ravindranath explained.
North American PS, however, will remain more expensive than polypropylene in the region, partly because prices for benzene — a feedstock used to make styrene monomer — are expected to remain around $4 per gallon. North American PS prices already are at historic peak levels.
Global PS demand will be driven by Asian electronics and appliance markets, Ravindranath said. The market also will be challenged by a threat from sustainability advocates and environmental concerns with packaging, she added.
For ABS, huge capacity additions set to open in China in 2013 and 2014 will keep global operating rates around 70 percent through 2017. These lower global operating rates, in turn, would lead global ABS prices to weaken, according to Ravindranath.
In North America, operating rates will be slightly higher at 75 percent, she said. ABS growth in North America should average 1-3 percent, led by transportation and electronics.
Supply and price issues that affected butadiene feedstock in 2011 and 2012 should be reduced in 2013. Northeast Asia will continue to lead the global ABS market with 65 percent of demand — well ahead of North America at 10 percent and Western Europe at 9 percent.
The U.S. will remain a net ABS importer, primarily buying material from Asia. U.S. ABS imports should exceed exports by about 305 million pounds this year, with that total rising to almost 440 million pounds by 2017.
Excess capacity will affect global markets for polycarbonate, nylons 6 and 6/6 and polybutylene terphthalate over the next few years, Blanchard said.
A sizable amount of PC capacity will be added in northeast Asia in 2012-16, but North America will remain a net exporter, he said. Global PC operating rates should be around 80 percent through 2017.
Among PC end markets, electrical/electronic leads the way with a 21 percent share, followed by film and sheet at 19 percent. Optical media, including CDs and DVDs, used to be PC's biggest sector, but it's now dropped to No. 3 with 14 percent, as new digital formats have taken hold. Blanchard said Blu-Ray DVDs haven't caught on quickly enough to slow optical media's decline.
In the nylon resin market, the automotive sector continues to hold sway, with a 50 percent stake in 6/6 demand and 35 percent of nylon 6. North American nylon demand has benefited from the comeback of the U.S. auto market.
Global nylon operating rates should be relatively low at 60-70 percent from 2012-17 because of an abundance of capacity being added in China in 2012-15. China also is adding large amounts of caprolactam feedstock used to make nylon 6, Blanchard said.
North America remains the world's largest producer of nylon 6/6 with a 41 percent market share. Northeast Asia is the largest nylon 6 producer with 58 percent of global production.
PBT remains a popular material because it offers tremendous electrical performance vs. nylon and because it doesn't absorb moisture. But PBT, too, is dealing with overabundant new capacity in China and elsewhere in Asia. As a result of low prices in those regions, U.S. imports of PBT grew 25 percent in the first half of 2012.
For PBT users, “this is an opportunity to make a new friend in Asia,” Blanchard said.