OUTLOOK ’16: US polystyrene to track benzene

HOUSTON (ICIS)–US polystyrene (PS) prices will largely follow the direction of feedstock benzene in 2016, given that benzene is the largest determining factor in PS price direction. However, PS supply and demand fundamentals also will come into play in pricing decisions.

PS prices rolled over in each month during the fourth quarter, and demand dropped off as 2015 came to a close. The demand prospect for 2016, however, remains positive.

Benzene accounts for about 75% of the cost of the other major PS raw material – styrene – and was a prime mover in the market last year. A popular rule of thumb holds that PS prices move 1 cent/lb for every 10 cents/gas move on benzene contract prices.

PS prices hit lows in 2015 not seen since 2012, while benzene prices last year dropped to the lowest levels since 2009. PS prices firmed a little in December after rolling over in October and November. PS producers believe PS prices are still too low, and that concern will continue to be addressed in 2016.

Global PS demand is expected to grow by an average of 4.7% from 2014 to 2020, led by rising demand from the packaging industry in developing countries, as well as increasing demand from consumer electronics, according to Transparency Market Research. However, growth rates in the US are much lower, with little to no growth seen for the market each year.

In order to take better advantage of that international demand, US PS exports climbed to 102,659 tonnes YTD through September 2015, which was up by 2% year on year, according to data from the US International Trade Commission.

US exports in 2016 are expected to increase to countries including Mexico and Canada, which together account for over 92% of total exports.

Some challenges remain in the industry, including ongoing efforts to ban the use of PS for food and other packaging due to environmental concerns.