OUTLOOK ’13: South Asia PS demand to be steady despite firm prices

03 January 2013 06:29  [Source: ICIS news]

By Veena Pathare

SINGAPORE (ICIS)--The demand for polystyrene (PS) in south Asia for this year is expected to be steady despite high prices for the product, regional producers said.

SM prices, which rose to highs of above $1,710/tonne (€1,299/tonne) CFR (cost & freight) China in December 2012, are forecast to remain firm in the coming year, owing to high upstream benzene costs, according to market sources.

PS producers’ offers for general purpose PS (GPPS) were at $1,875-1,925/tonne CFR Middle East and high-impact PS (HIPS) offers were at $1,950-2,000/tonne CFR Middle East on 21 December, according to ICIS data.

India and Pakistan markets are largely self-sufficient and depend on regional production for the bulk of their PS requirements.

In India, the demand for PS, in terms of volume, is expected to be largely unchanged compared with 2012 levels and driven by the downstream household appliances manufacturing sector.

Regional producers are optimistic that domestic demand, which is currently weak because of the ongoing winter season, will normalise from February onwards, despite the high offer prices.

Prices in India, which consumes about 20,000 tonnes/month of the product, are expected to peak ahead of the summer season from the refrigerator, television and other household goods manufacturing sectors.

“The season for [the] purchase of household appliances begins in February and stays upbeat all the way until November,” according to a regional producer and exporter.

PS demand is also expected to come in from the packaging sector and underpin the firmer PS offers from regional producers.

“In December, PS demand was weak post-festive season, while offer prices were high. But February onwards, demand will pick up as people look to buy, and [PS] converters will have little choice but to purchase PS at higher prices,” the producer added.

The situation in Pakistan is similar to that of India, with the region’s major producer expecting demand to strengthen from the refrigerator manufacturing segment.

“Pakistan does not face too harsh a winter, and a number of downstream PS converters look to stock their inventory in January ahead of summer when [the] demand for refrigerators and air conditioners peaks,” the producer said.

However, most PS producers are pessimistic about their margins in 2013, because of their expectations of rising feedstock costs.

Weak demand on account of the winter season in Pakistan and the post-festive break in India capped producers’ offers despite a steep hike in SM prices in the fourth quarter of 2012.

If SM prices continue to increase at a similar pace, converters will soon start looking at alternatives to PS, such as styrene acrylonitrile (SAN) and acrylonitrile butadiene styrene (ABS), according to market participants.

SAN and ABS are the respective substitutes for GPPS and HIPS in certain applications and possess similar properties.

SAN and ABS were traditionally higher-priced than PS, but the three products have since become on par because of the recent PS price uptrend.

“ABS has never been as cheap as HIPS, but now with PS selling at such high levels, ABS can be substituted for PS in automotives, packaging and electronics,” said a Pakistan-based producer.

The two substitutes have gained the attention of PS converters in 2012 and could compete closely with PS in 2013, if the rise in PS prices continues.

However, not all PS makers were concerned about the threat of lower-priced substitutes as they said not all PS applications can make use of SAN and ABS.

Such PS makers maintain that the near-term future for PS is stable.

“Although ABS and SAN are potential threats and a growing concern for PS manufacturers, PS cannot be substituted overnight, and not everybody can use these substitutes for all PS applications,” said an India-based producer.

“Using these substitutes would mean making modifications in the downstream manufacturing processes, which is not easy, and once done, it is difficult to go back to using PS immediately,” the producer added.

($1 = €0.76)

By: Veena Pathare
+65 6780 4327

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