07 June 2013 09:54 [Source: ICB]
Expandable polystyrene (EPS) is a rigid cellular form of polystyrene (PS) with good thermal insulation and shock-absorbing properties, high compressive strength, very low weight and resistance to moisture.
Use as an insulation medium is the material's principal application, accounting for around 75% of total consumption. The other major use is packaging.
Demand was badly hampered in the first quarter of 2013 by the inactivity of the construction industry. However, low volumes were mainly attributed to unusually bad weather from the beginning of the year.
Consumption was below normal for April, and offtake in the insulation sector did not rise after Easter. Although cold weather may have played a part, lack of economic dynamism in many parts of Europe also dampened activity.
Consumption increased in May but was less buoyant than usual for that time of year. In the first quarter of 2013, demand for packaging grade had fared better than insulation, especially because of the severe winter. Now, players said, volume growth was coming mostly from insulation grade.
In December 2012, prices rolled over from November. Producers faced a €15/tonne increase in the styrene monomer (SM) contract but also lower demand from converters.
In April, prices dropped by around €35/tonne, but producers were able to retain nearly half of the styrene reduction. A slight decline of around €5/tonne was recorded in May.
In six months, therefore, price volatility delivered an overall reduction of approximately €30/tonne. Despite monthly variance against EPS, the styrene contract price has declined by €28/tonne in the same period.
EPS beads are produced in the suspension process by adding a blowing agent under pressure - normally pentane - that causes the resin to foam during moulding. It may be performed as a single- or two-step process.
Against a background of broadly slowing economies in Europe, few EPS players are optimistic about the prospects for the rest of this year. With insulation now accounting for around three-quarters of total EPS consumption in the European market, a depressed outlook for the construction industry is a discouraging factor. Southern Europe is viewed as the most vulnerable of the traditionally important geographic markets. However, a migration of processing activity towards eastern Europe continues to be seen and the strongly buoyant Turkish market is becoming increasingly significant.
While EPS producers may be able to divert sales to more active areas, there is much less scope for converters to do the same. Some believe volumes will decline further in countries such as Italy, putting in jeopardy the continued existence of some businesses. Some producers share the concern about the financial viability of certain converters.
Although the short-term outlook is relatively gloomy, particularly as some larger, government-backed construction projects have come to the end of their life and not been replaced by new ones coming on stream, market sources are still bullish about the medium-term case for EPS growth and profitability. The trend towards energy conservation supplies the impulsion for the industry and, even in 2013, is expected to provide opportunities. Low-lambda material, mainly in the form of grey EPS, is the principal driver and is forecast to be the engine of any growth and profitability in the coming year.
With this positive outlook in mind, France's Total has converted one of its polystyrene (PS) lines in Feluy, Belgium, to produce EPS instead. Although full details are yet to be disclosed, the former capacity of both PS lines at the plant was approximately 160,000 tonnes/year. Commercial output from the facility was said to be imminent in the second quarter of 2013. The venture represents Total's entry into the EPS market and is the first plant dedicated solely to production of grey EPS.
Additionally, further increases in capacity at existing plants are planned by BASF in Germany (an increase of 60,000 tonnes/year by end-2013) and Sunpor in Austria, where the specific tonnages are not known.
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