04 October 2013 09:38 [Source: ICB]
Expandable polystyrene (EPS) is a rigid cellular form of polystyrene (PS) with good thermal insulation, shock-absorbing properties, high compressive strength, low weight and resistance to moisture. The largest outlets are in the building and construction sectors, where applications include foam, road construction, bridges, drainage, flotation and sound insulation.
Another major application is in packaging, particularly for food and delicate electronics. Other uses include providing protection in crash helmets and as decoration in design work.
Supply of EPS in Asia remained in excess of demand although facilities in China operated at a reduced rate of under 60% for most part of 2013. Major plants are mostly located in China, and there has been increased exports out of China as local demand was poor.
Demand for EPS resins was mostly below expectations this year. While there was some optimism in the early part of the year, this soon gave way to the realisation that consumption of resin would not be as strong.
Weak economic conditions in the US, the eurozone and slowing growth in Asia reduced demand for Asia-made goods. Consequently, demand for packaging also declined.
A tight credit policy stance adopted by the new Chinese administration earlier this year also resulted in a slowdown in infrastructure and construction activities. As a result, demand for EPS from this key sector also weakened.
Asia EPS prices reached an all-time high of $1,910/tonne CFR NE Asia in January 2013. Optimism was then high after the eurozone crisis was averted in the fourth quarter of 2012.
Market players expected demand to recover strongly after the Lunar New Year holidays in February. However, the lack of improvement in March and April saw EPS prices trending lower from high stockpiles along the supply chain. Prices subsequently drifted lower to $1,835/tonne CFR NE Asia in May.
From the middle of the year, however, strong performance in the feedstock styrene monomer (SM) sector lifted EPS prices again although demand remained weak. Prices soon set another all-time high of $1,950/tonne CFR NE Asia in the first half of August.
The premium of flame retardant (FR) resins over packaging grades also narrowed to $50-60/tonne in the third quarter from $70-80/tonne in the first half of the year. Prices of the FR agent has declined due to weak demand.
EPS is made in beads, which are produced in the suspension process by adding a blowing agent under pressure – usually pentane – that causes the resin to foam during moulding.
With supply in the key Chinese market outstripping demand by almost 2:1, capacity growth is expected to remain below 5%/year. Growth in the key construction and infrastructure sector is likely to be constrained due to the Chinese government’s tough stance towards asset bubble formation.
The new administration has decided to shift the world’s second-largest economy from its dependence on exports to local consumption. At the same time, it will slow economic expansion from above 10%/year in previous years to around 7-8%/year moving forward, which is deemed more sustainable.
Talk of using extruded polystyrene (XPS) instead of EPS in building insulation has circulated the market in recent months. Given the poor record of fire prevention using EPS in China, the government has been looking for alternative material to be used as insulation panels.
With China’s EPS remaining in oversupply, the need to export resins to other parts of Asia and the world will become increasingly important as domestic infrastructure and construction expansion could remain in check.
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