CHICAGO — North American PVC makers should continue to benefit from a stronger housing sector, while global polystyrene growth will improve somewhat in a still struggling market.
Those were the expectations of market experts from the IHS consulting firm at the 2014 Global Plastics Summit, Oct. 1-2 in Chicago. The event was co-hosted by IHS and the Society of the Plastics Industry Inc.
PVC demand growth is set to average 3.8 percent in the Americas from 2014-19, according to Ana Torres, associate director of chlor-alkali, vinyls and inorganics at IHS. That's a good growth rate, but still behind 4.7 percent in China and 6.5 percent for India in that period.
North America and the Middle East continue to have advantaged feedstocks for PVC, which creates advantaged ethylene as well as lower electricity costs, Torres explained. Tight ethylene supplies have limited North American PVC production in 2014, with producers reducing export sales in order to supply the domestic market, she said.
IHS forecasts U.S. housing starts to rise from their current annual level of about 1 million to 1.4 million by the end of 2015. This will be good news for North American PVC, which derives about 70 percent of its sales from construction uses, and will create a chance for PVC demand to return to its peak levels of 2004-05, Torres added.
The North American market also could see more capacity expansion, although few such projects have been announced to date, unlike the wave of expansions announced for polyethylene, which also benefits from advantaged ethylene.
“There's room for new players or for companies to expand in the domestic [PVC] market,” Torres said.
For 2015, North American PVC prices are expected to move along with the ethylene market, she added, with more resin available and with producers trying to balance domestic demand with exports.
In the PS arena, some growth improvement is better than none, but the material continues to battle high prices and waning demand.
Global PS growth is anticipated at 1.4 percent from 2014-19, up from 0.8 percent in 2009-13, according to principal analyst Priya Ravindranath. But global operating rates remain under 70 percent, even after significant capacity reduction in North America, Western Europe, Japan and other parts of Asia.
“There's excess capacity of 30 percent in the [PS] market today, and a lot of room for capacity reduction,” Ravindranath said.
High prices for benzene feedstock have been pushed along to styrene monomer and then to PS, resulting in North American PS prices rising 83 percent since 2009 and Northeast Asian prices for the material being up 61 percent in the same period. This has led producers of packaging and other products to move away from PS and into other materials.
Although North American PS profit margins now are positive, Ravindranath added, annual demand for the material is expected to be roughly flat from 2014-19 after averaging a 1 percent loss from 2009-13.