HOUSTON (ICIS news)--The polystyrene (PS) market in the Americas may start recovering margins as producers continue to consolidate, a consultant said on Monday.
"Right now the industry is at a crossroads," said Robert Bauman, vice-president of polymers for Nexant, a consultant.
PS is now the only commodity polymer in the Americas with just three major producers. Those producers account for 60% of the capacity in the region, said Raul Arias, Nexant manager for Latin America.
However, consolidation does not address the fundamental problem in the market, in that demand is not growing, said Greg Smith, global business director of engineering resins for Resin Technology.
"The polystyrene industry really continues to be plagued by that issue," he said. "I just don't know if the business can improve significantly without some change that can increase demand."
Recently, US majors Dow Chemical and Chevron Phillips Chemical have started operations at their Americas Styrenics joint venture, the second large venture to form in North America in less than a year.
In October, INEOS and NOVA Chemicals expanded their INEOS NOVA joint venture to include styrenics. Counting Total, the region now has three major PS producers, down from five.
With fewer producers, the worst may be over for the region's PS, said Jerry Fordyce, editor of the Plastic Market Monthly, a pricing report published by Townsend's Polymer Services & Information.
In one sign that the market is improving, prices for PS have risen in the US. The increases indicate that producers have successfully passed through feedstock costs.
Average bulk prices for PS were 98.50 cents/lb ($2,172/tonne) (?,411/tonne) on 2 May, up from 88.50 cents/lb on 19 October, according to global chemical market intelligence service ICIS pricing.
"The fact that they were able to cover their increases is important," Fordyce said. "Margins for polystyrene are almost nonexistent."
Moreover, with the Americas down to three major producers, the industry will be more reluctant to lose money by lowering prices, Bauman said. "If that cannot result in more discipline in the industry, I would be much surprised."
If the US economy avoids a recession, demand-driven pricing for polypropylene (PP) could encourage customers to buy PS as a substitute, Bauman said. "PS markets could improve significantly by the end of the year."
Bauman said Dow could close some PS plants under the new JV, since the company has three that have capacities below 100,000 tonnes/year.
However, Fordyce said shutdowns are unlikely, since Dow and Chevron Phillips have little overlap with regards to their PS plants.
As it is, there is little overlap among the joint venture's facilities, Fordyce said.
"Right now the industry is at a crossroads," said Robert Bauman, vice-president of polymers for Nexant, a consultant.
PS is now the only commodity polymer in the Americas with just three major producers. Those producers account for 60% of the capacity in the region, said Raul Arias, Nexant manager for Latin America.
However, consolidation does not address the fundamental problem in the market, in that demand is not growing, said Greg Smith, global business director of engineering resins for Resin Technology.
"The polystyrene industry really continues to be plagued by that issue," he said. "I just don't know if the business can improve significantly without some change that can increase demand."
Recently, US majors Dow Chemical and Chevron Phillips Chemical have started operations at their Americas Styrenics joint venture, the second large venture to form in North America in less than a year.
In October, INEOS and NOVA Chemicals expanded their INEOS NOVA joint venture to include styrenics. Counting Total, the region now has three major PS producers, down from five.
With fewer producers, the worst may be over for the region's PS, said Jerry Fordyce, editor of the Plastic Market Monthly, a pricing report published by Townsend's Polymer Services & Information.
In one sign that the market is improving, prices for PS have risen in the US. The increases indicate that producers have successfully passed through feedstock costs.
Average bulk prices for PS were 98.50 cents/lb ($2,172/tonne) (?,411/tonne) on 2 May, up from 88.50 cents/lb on 19 October, according to global chemical market intelligence service ICIS pricing.
"The fact that they were able to cover their increases is important," Fordyce said. "Margins for polystyrene are almost nonexistent."
Moreover, with the Americas down to three major producers, the industry will be more reluctant to lose money by lowering prices, Bauman said. "If that cannot result in more discipline in the industry, I would be much surprised."
If the US economy avoids a recession, demand-driven pricing for polypropylene (PP) could encourage customers to buy PS as a substitute, Bauman said. "PS markets could improve significantly by the end of the year."
Bauman said Dow could close some PS plants under the new JV, since the company has three that have capacities below 100,000 tonnes/year.
However, Fordyce said shutdowns are unlikely, since Dow and Chevron Phillips have little overlap with regards to their PS plants.
As it is, there is little overlap among the joint venture's facilities, Fordyce said.
