Oct 30 2010
Chemical Market Associates, Inc. (CMAI) announces the completion of the 2011 World Polystyrene/EPS Analysis, an annual global study that covers historical trends and future projections for supply, demand, production, capacity, trade, pricing and profitability of the global Polystyrene and EPS industry for the period 2005 to 2015.
Included with each analysis is 12 months access to CMAI's online capacity and supply/demand databases with a mid-term supply/demand update incorporating CMAI's latest market outlook. The 2011 edition, for the first time, features CMAI's market sector forecasts on vehicle production and construction as well as projections of the middle class size in the BRIC countries. The analysis is a necessary resource for business managers and planning professionals who need to make strategic business decisions in a rapidly changing global economic and market environment.
Current Market Situation
After years of weak performance and painful restructuring, producers in developed markets have recently focused more on margins than on volumes. This change in strategy, together with the consolidation and deep rationalization efforts of recent years, has resulted in margin levels in North America and West Europe not seen in a decade. In spite of the weak demand growth rates forecasted, CMAI expects future margins for the developed regions to be much better than those from recent years.
After the sale of Styron to Bain, Dow Chemical drops from the list of top PS producers. On a shareholder basis, Total is now the leader in PS production. It is followed by BASF, who's been unable to complete its sale of the styrenics businesses. Bain Capital, through its Styron acquisition, is now one of the world's largest PS producers, followed by the Abu Dhabi Government through its investment in Nova Chemicals.
Market Outlook
Although polystyrene continues to suffer from a number of maladies, ranging from the lack of a new stellar growth demand segment to volatile pricing, the recession may have helped polystyrene's supply/demand balance by expediting the shutdown/rationalization process. In addition, the recession has focused the major polystyrene producers on profitability versus market share, and in tandem with reduced supply, this has given polystyrene producers a taste of profitability in 2010, at least in the mature regions of North America and Europe where most of the rationalization has occurred. The forecasted demand growth for PS is not particularly strong; however, high PP prices are expected to cause converters that had given up on PS to give it another look.
The industry in China has a structure that defies logic and should be rationalized. Demand is balanced with capacity, but the industry runs typically at 50-60 percent utilization rates, with imports making up the difference. This degree of redundancy would not be tolerated or be possible anywhere else. The underutilized or idle plants simply will not "die." They get sold, bought, renamed, put in hibernation, but they never seem to get scrapped. The environment on costs for the polystyrene industry has changed, probably for good. As crude oil prices are now as much a financial instrument as a function of supply and demand, their volatility and absolute strength could be the "extinction event" for an increasing number of polystyrene producers in that country.