05 December 2011 00:00 [Source: ICB]
Expandable polystyrene (EPS) is a rigid cellular form of polystyrene with good thermal insulation, shock absorbing properties, high compressive strength, low weight and resistance to moisture. The largest outlets are in building and construction sectors, where applications include insulation foam, road construction, bridges, drainage, floatation and sound insulation.
Another major application is in packaging, particularly food and delicate electronics packaging. Other uses for EPS include providing protection in crash helmets and as decoration in design work.
Flint Hills Resources, the third largest EPS producer in the US, announced in October that it is exploring the potential sale of its 120,000 tonne/year EPS plant in Peru, Illinois, US. The company was in early talks with potential buyers in the weeks following the announcement, but did not say whether it would close the facility if it could not find a buyer. The company bought the Peru facility from Huntsman in 2007.
Other major US producer StyroChem has moved most of its capacity to Canada, using its capacity at its Forth Worth, Texas, US plant as a swing site to boost production should it be needed.
US demand for EPS has remained steady, with favorable sales volumes in November. Some buyers were believed to be rebuilding low inventories as the market neared its price bottom. Demand for block grade EPS for the insulation sector continues to be stimulated by the drive for energy conservation.
Conditions were steady for the week ending November 22 as buyers and suppliers expected no significant market shifts through to the end of the year. Buyers are said to be hoping for another price drop in December, but producers said they expect prices to roll over from November to preserve margins and to protect against a huge price swing when feedstock costs begin to rebound. US spot prices were at 84-92 cents/lb ($1,852-2,028/tonne, €1,389-1,521/tonne) for both block and package grades DEL (delivered), as assessed by ICIS.
EPS is made in beads, which are produced in the suspension process by adding a blowing agent under pressure, normally pentane, that causes the resin to foam during molding. It may be performed as a single or a two-step process.
Buyers and suppliers said they anticipate feedstock benzene costs to rise, leading some to predict an EPS price increase in January. Others were saying that the impact of higher feedstock prices would be felt in February.
Benzene prices are viewed as being spring-loaded - currently artificially undervalued relative to crude because of an influx of imported material, according to market sources.
Meanwhile, on the supply front, it remains unclear who would be interested in buying Flint Hills Resources' Illinois facility. The site had received routine complaints from suppliers about slim profit margins for EPS, market sources reported.
One source in the financial community said it expects other US competitors to be the only interested buyers. An EPS buyer suggested it is possible a competitor could purchase the facility with plans to shut it down, which would impact the market significantly, the buyer said.
In terms of the end market, an even split between gains and losses in October reflected an improvement in construction for apartment and private nonresidential projects. However, this was offset by a declining public market and a stalled single-family sector, according to the National Association of Realtors (NAR).
US existing home sales rose by 1.4% in October. Total housing inventory at the end of October fell by 2.2% to 3.33m existing homes for sale, representing an eight-month supply at the current sales pace. October sales of existing homes were at a seasonally adjusted annual pace of 4.97m units, an improvement from the downwardly revised figure of 4.9m units in September, the NAR reported.
In construction, employment rose in half of the US states and decreased in the other half in October and during the past year, closely mirroring the national employment picture, according to the Association General Contractors of America.
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