Price and market trends: India polystyrene demand weakness to continue

22 March 2013 09:26  [Source: ICB]

India's polystyrene (PS) consumption looks set to end the current fiscal year at below 250,000 tonnes, representing a 6-7% decline from the previous year, with the weakness expected to continue and weigh on prices of the material, industry sources said.

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The phase-out of CRT televisions in India is hitting PS demand 

A growing trend of substitution, particularly for high impact PS (HIPS) by acrylonitrile-butadiene-styrene (ABS), is partly to blame for the weaker demand in the year ending 31 March 2013, they said.

On 8 March, general purpose PS (GPPS) prices were assessed at an average of $1,920/tonne CFR (cost and freight) India, down by $2.50/tonne from the previous week, while high impact PS (HIPS) were steady at $2,030/tonne, according to ICIS.

PS is widely used in casings of household appliances, including air-conditioners, refrigerators and televisions - which are referred to as "white goods".

"Sale of 'white goods' are definitely down from last year - that has affected demand for PS," said a source at a major Indian producer.

Uncertainty in the economic outlook and rising domestic interest rates have made Indian consumers cautious, leading to lower sales of electronics and household appliances, consequently hurting PS demand, he said.

DOMESTIC PRODUCTION

India's PS requirement is mostly covered by domestic production, industry sources said.

Major producers in the country include Supreme Petrochem with a 272,000 tonne/year capacity; LG Polymers India with an 80,000 tonne/year capacity; and BASF with a 60,000 tonne/year capacity.

India is also a major exporter of PS to the Gulf Cooperation Council (GCC) countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE - and East Mediterranean markets. India also imports the material but only in small volumes, mainly from Singapore or Taiwan.

PS has another major end-use in food packaging, being the raw material for the production of styrofoam. It is the world's fourth most widely used polymer after polyethylene (PE), polyvinyl chloride (PVC) and polypropylene (PP).

SUBSTITUTION PREFERRED

High cost, backed by firm prices of feedstock styrene monomer (SM) is among the main deterrents to PS consumption as it encourages substitution.

For the most part of current fiscal year, which started April 2012, HIPS prices in India were firm as SM prices were kept high by tight supply.

India Polystyrene

In September 2012, SM prices rose to a record high of $1,820/tonne FOB (free on board) Rotterdam. Prices of the feedstock have also been on an uptrend for nearly a year, peaking at $1,800/tonne CFR China in early January 2013, according to ICIS.

PS converters, however, could not easily pass on their high production cost to consumers, prompting cautious buying to avoid an inventory build-up. A number of them have begun to evaluate substitutes such as polyethylene terephthalate (PET) and PP for applications in food packaging, and the use of ABS instead of HIPS, industry sources said.

ABS - which is traditionally more expensive than HIPS because of its better strength properties - found increasing acceptance among manufacturers of electronic appliances, as prices of the rival material rose steeply, narrowing the price gap between ABS and HIPS.

CRT TV SWITCH-OFF

The gradual phasing-out of cathode ray tube (CRT) televisions (TVs) in India, with the advent of new technology that made slimmer models possible, exacerbated the decline in demand for HIPS.

ABS is used in the now popular light-emitting diode (LED) and light crystal display (LCD) TVs, as it lends a glossy finish to appliances. HIPS, on the other hand, tends to give a duller and matt finish.

"The phase-out of CRT TVs in the country is likely to affect PS demand further, as these form a significant portion of the PS market," a source from another Indian PS maker said.

PS is now relegated to the back portions of LCD and LED TVs, while for the visible areas that require a high-gloss finish, ABS is now being used.

In the food packaging sector, PET and PP are gaining popularity in view of the high PS prices.

Plastic converters in the GCC are also finding difficulty passing on the high PS prices to end-users, thereby also weakening the demand for India's PS, industry sources said.

Supreme Petrochem and LG Polymers are the major exporters of PS to the Middle East.


By: Veena Pathare
+65 6780 4327



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