Polystyrene

11 September 2000 00:00 [Source: ICB]

Despite prices reaching a five year record in 2000, profits are small and margins still need to be improved, say suppliers

Supply/demand

Industry oversupply has forced producers to restructure and rationalise production and six major companies now account for 95% of European capacity. New capacity which started last year at BP and Dow still needs to be absorbed but the process is being accelerated by plant closures and reductions. BP shut a 60 000 tonne/year line in Wingles, France, when the new 85 000 tonne/year unit began production in August 1999, and also closed three EPS plants at the site, totalling 30 000 tonne/year. BASF reduced production at Antwerp, Belgium and Ludwigshafen, Germany by 10% from mid-2000. Availability during H1 2000 has been tight, as strong demand and shortages of styrene feedstock restricted polymer production, leading to some customers being put on allocation. Sources report growth of about 8% for H1 2000, based on west European producer sales. But inventory building at converters due to rising prices is said to be a big factor. The situation is expected to reverse in H2 as consumers destock. A growth rate of 4% for the year is predicted.

Prices

Prices have risen rapidly this year, driven by strong demand and spiralling feedstock costs. Since hitting record lows in 1999, polystyrene prices reached their highest level this year for five years. However, suppliers say profits are small and margins still need to be improved, although they have recovered from last year's disastrous levels. August prices were quoted between DM2.30-2.40/kg for general purpose grades. High-impact prices are on average 8-10 pfg/kg higher than general purpose. Producers are seeking a price increase of 10-15 pfg/kg this month in a continued bid to restore margins. Although styrene feedstock contract prices dropped by E25/tonne in quarter three, players say they have still not recovered all of styrene's E250/tonne rise in second quarter contracts.

Technology

The two main types of PS technologies are the suspension route, which is a batch operation, and the bulk, or mass, process, which is increasingly a continuous operation. A number of PS producers have recently made their technologies available for licensing, including BP, Nova and Nippon Steel. EPS is produced in the suspension process by adding a blowing agent that causes resin to foam during moulding. Dow Chemical and Idemitsu have applied metallocene catalysts to produce syndiotactic PS, which has a highly regulated stereo-structure with a crystalline nature.

Uses

Polystyrene is a thermoplastic polymer that is used in a variety of consumer and commercial products. Major applications are in domestic appliances, construction, electronics, toys and food packaging, which is the largest end user. PS is available in several forms: general purpose (crystal), medium impact, high impact and expandable (EPS). EPS is used in insulation and packaging.

Outlook

Operating rates are currently over 90% and are predicted to stay at healthy levels until the end of 2001 because of the lack of new capacity planned in Europe. The only project announcement so far has come from AtoFina, which will build a new plant in Carling, France. The 120 000 tonne/year facility will be built in phases, with the first 60 000 tonne/year phase scheduled for completion by mid-2001, taking the site's total capacity to 210 000 tonne/year. The company will also hike capacity by 20 000 tonne/year at El Prat de Llobregat, Spain by end 2000. Demand growth is forecast at just above GDP rates in Europe which is predicted to face a supply pinch by 2003. Markets in eastern Europe, where growth is at double digit figures, will be a key target for west European players as part of this demand will be met by imports. Global export markets are also improving as economies in Asia and South America continue to recover.

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EUROPEAN PS CAPACITY,'000 TONNE/YEAR

Producer	Location	Capacity
Western Europe
AtoFina	Carling, France	150
	Gonfreville, France	160
	Prat de Llobregat, Spain	60
	Stalybridge, UK	100
BASF	Antwerp, Belgium	220
	Ludwigshafen, Germany	320
	Tarragona, Spain	28
BP	Wingles, France	120
	Marl, Germany	180
	Trelleborg, Sweden	70
Dow Chemical	Barry, UK	80
	Bilbao, Spain	70
	Lavrion, Greece	27
	Schkopau, Germany	130
	Terneuzen, Netherlands	34
	Tessenderlo, Belgium	190
EniChem	Feluy, Belgium	150
	Mantova, Italy	200
Linpac	Sherborne, UK	20
Nova	Carrington, UK	180
	Breda, Netherlands	120
Eastern Europe
Arpechim	Pitesti, Romania	25
Dunastyr	Szazhalombatta, Hungary	80
Dwory	Oswiecim, Poland	50
Kaukuk	Kralupy, Czech Republic	87
Neftochim	Burgas, Bulgaria	70
Petro	Borzesti, Romania	35
Petro Tel	Teleajen, Romania	25
Polimeri-OKI	Zagreb, Croatia	57

Source: CMAI

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