Chemical profile: US polycarbonate

USES

Polycarbonate (PC) is an engineered plastic produced from bisphenol A (BPA) through building blocks benzene and propylene that offers clarity and high-impact resistance.

Aside from the automotive segment, market strength has come from two other major market areas – the electrical/electronic and glazing and sheet segments.

Polycarbonate weighs much less than glass and can be injected or moulded to produce various shapes for an assortment of purposes and is used in optical media such as CDs and DVDs, housing components, aircraft and missile components, water cooler bottles, safety helmets, medical equipment, as well as eyeglasses.

ICIS monitors the general purpose (GP) moulding and GP extrusion grades in the US, Europe and Asia-Pacific, and tracks prices for optical grade polycarbonate in the Asia-Pacific report.

SUPPLY/DEMAND

US supply of polycarbonate has lengthened in recent years despite the exit of producer Styron from the commodity grade market. The company chose to exit the commodity grade market in 2014, having been receiving most of that material from Dow Chemical’s plant in Freeport, Texas.

With Styron exiting that portion of the PC market, Dow shut down the polycarbonate plant in late 2014 and has not restarted it. Despite this, growing volumes of imports from Asia have kept the US market well supplied for polycarbonate.

Asian producers have frequently been able to offer significant discounts against domestic PC because of overproduction in the region and the need to keep plant operating rates healthy amid capacity expansions since 2010.

While the two remaining US producers have experienced the competition, demand in the US has been strong enough to support both producers comfortably along with increased imports.

Polycarbonate demand in the US has been steady to slightly higher, tied closely to GDP growth rates in the country.

The main demand sector remains the US automotive industry, which experienced stronger years in 2014 and 2015 than had been seen following the recession of 2008 and after.

Demand for polycarbonate from the US construction sector has been mixed, with construction spending struggling to return to pre-recession levels and demand described as volatile.

PC demand into the consumer electronic and optical media sectors had been growing through 2015 but has experienced a slowdown in much of 2016, tied to a lagging US and global economy.

PRICES

Many US PC contracts are strictly tied to feedstock costs, which focus on same-month phenol and benzene contracts. In the past year, US PC prices have increased 3 cents/lb since late Q2 2015, tracking mostly with feedstock movements.

Polycarbonate prices spiked in August 2015 before falling in Q3 2015 and slowly moving up since then.

For freely negotiated contracts, prices have been steady in most of 2016, with long supply and ample imports outweighing the strengthening demand and mostly increasing feedstock costs.

Despite this, US polycarbonate producers have sought price increases of 3-4 cents/lb on domestic contracts, but pushback from buyers and distributors has been strong and this has kept the increases from taking effect in most cases.

TECHNOLOGY

The engineered plastic has been in use since the 1950s, when Bayer and GE started production processes to make polycarbonate from BPA. Changes were made to the process to respond to environmental restrictions on phosgene, which was initially used in the process.

US producers include Covestro, SABIC and Styron. Other global producers include Asahi, LG Chemical and Mitsubishi.

PC can also be blended, or compounded, with other materials such as acrylonitrile-butadiene-styrene (ABS) to form alloys that meet specific downstream needs.

OUTLOOK

US PC prices are expected to continue facing downward pressure from high levels of imported Asian material, given capacity expansions in the region since 2010.

The US remains the strongest consumer region globally and will remain a focus for exporters to gain market share, even if margins on those exports remain low. Despite this, domestic consumption is expected to be able to support the two current producers at steady to strong operating rates.

Major PC demand growth remains unlikely until automotive windshields adapt PC as their preferred material of choice.

Market participants have said that efforts by PC producers to allow for PC to be tested to fulfill this role remain a challenge in the global regulatory system.

However, at a recent conference, several major global polycarbonate producers said they expect testing to be designed in the next few years, which should enable PC to replace glass for many auto manufacturers, given polycarbonate’s superior strength-to-weight ratio and lower prices.