OUTLOOK ’17: US PS supply adequate, demand on the rise

By David Love

HOUSTON (ICIS)–The US polystyrene (PS) market will begin 2017 with adequate supply and stronger demand, especially after the slow demand months of November and December.

Demand during the final two months of the year is reduced as a result of seasonality patterns.

The final two months of 2016 saw PS market participants involved in inventory management. January, however, is a month in which demand will rise back to a more normal level.

It is also a time of year when weather can become a factor. Snow and icy conditions can slow logistics down considerably. January will also see a bit of pre-planning for spring.

US PS prices will largely follow the direction of feedstock benzene prices in 2017, given that benzene is the largest determining factor in PS price direction. However, PS supply and demand fundamentals will also come into play in pricing decisions.

Benzene accounts for about 75% of the cost of the other major PS raw material – styrene – and was a prime mover in the market in 2016. A popular rule of thumb holds that PS prices move 1 cent/lb for every 10 cents/gal move on benzene contract prices.

PS contract prices have yet to be determined for January, after rolling over in December and decreasing by 2 cents/lb in November for most accounts. Historically, January prices increase or roll over, but rarely weaken.

The spread between PS and benzene began to widen in 2014, and then widened significantly at the start of 2015 as benzene prices fell sharply. The spread remained wide during 2015 and 2016.

Recent trends in PS exports and imports are expected to continue in 2017. US PS exports and imports were higher in 2015 than 2014, and that trend continued in 2016.

Source: US International Trade Commission

Exports during the first nine months of 2016 were up by 16% from the same period a year earlier. PS imports from January through September 2016 were up by 32% from the same timeframe in 2015. Mexico has been and will continue to be the largest destination for US exports, and the largest PS supplier to the US.

North American PS producers include Americas Styrenics, Group Idesa, INEOS Styrolution, Resirene and Total Petrochemicals USA.