OUTLOOK ’19: Single-use ban, line conversion to weigh on European PS market

LONDON (ICIS)–The potential impact of EU legislation banning certain single-use plastics by 2021, combined with concerns over volatility in feedstock prices and shrinking nameplate capacities are key issues for the European polystyrene (PS) market in 2019.

EU PLASTIC BAN
In late October, the EU Parliament voted to approve a directive that would outlaw a range of single-use plastic products within the 28-country bloc by 2021.

The list of proposed plastics to ban include single-use plates and cutlery, two items often made of PS and particularly important to markets in southern Europe during the summer months when water usage is often restricted.

Depending on how the legislation is interpreted and finalised, the ban could impact PS consumption in Europe by over 5%, according to some participants’ estimates.

PS converters and sellers in southern Europe, especially Italy, are likely to be hit hard by the ban.

In areas of southern Italy during the summer, due to water usage limitations, members of the public tend to purchase single-use cutlery and crockery, many of which are made from general purpose polystyrene (GPPS).

However, not all PS businesses are as gloomy about the prospects of a potential ban.

One producer said that a consultation and evaluation period of the single-use plastics targeted by the ban are expected to be carried out, adding that the results of these measures could lead to fewer products than previously thought being prohibited.

Political action against single-use plastics related to marine litter may have also helped spur on chemical recycling projects related to PS production, such as the recent announcement by major styrenics producers in Europe to promote and develop better PS recycling capabilities.

CONVERSIONS
Likely before any impact from the single-use plastic ban is the prospect of tightening supply in 2019, as major European producer INEOS Styrolution carries out a conversion of one of its PS lines at its Wingles site in northern France.

The new acrylonitrile-butadiene-styrene (ABS) line is anticipated to come online in the first quarter of 2020, and some PS participants expect the full impact of the closing of the PS line to be already felt in early 2019.

According to one producer, the converting of one of INEOS’ PS lines at Wingles is the equivalent of almost 4% of European PS nameplate capacity being removed from the market.

“Operating rates on average are not bad on PS [and at the] highest levels they’ve been in a long time … Less supply could bring some upside,” the producer said.

However, some buyers are sceptical that a reduction of that size would influence fundamentals much.

These buyers independently said that PS plants’ run rates could increase slightly to make up for the loss, adding that imports from outside Europe could also make up for any shortfall in the near term.

Although there was tightness with certain grades of material due to pre-buying activity and some ongoing production cutbacks in the fourth quarter of 2018, water levels on the River Rhine have improved rapidly and BASF’s production woes are easing.

Most sources expected availability to have normalised by the end of January.

However, most participants are focusing energies on the ongoing issue of price volatility, often dictated by a rapid rise and then sometimes sharp fall in upstream styrene monomer costs.

FEEDSTOCK VOLATILITY
Volatile upstream costs are nothing new. According to ICIS data, styrene and PS prices have experienced sizeable volatility for at least one quarter of any given year since 2014.

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As styrene monomer makes up over 90% of most GPPS, and even some high impact PS (HIPS) grades, PS prices tend to reflect monomer movements.

A number of unpredictable drivers influence styrene prices and ongoing volatility has made business for PS converters and customers further down the value chain difficult.

Many PS resin buyers and PS product/application purchasers would prefer more predictable costs.

According to some buyers, rapid price movements in either direction are difficult to pass on to customers further downstream where much business is conducted via quarterly or bi-annual contracts, rather than monthly like styrene monomer.

This, is turn, can make consistent profitably difficult and sometimes squeeze margins.

Multiple buyers said that the volatility in recent years has made it difficult to justify investments in the market, adding that some end users have been put off choosing PS for some applications and instead sought to develop alternative polymers capable of replacing PS.

“[We could have some] internal product switching from PS to PP [polypropylene] – that may have an impact on … the second half of next year. If the project goes head, it will probably be a 20% reduction [in our PS consumption],” one buyer said.

The buyer added that there are many discussion within the PS industry about about volatility, given the large and “wildly unpredictable” price fluctuations.

“People don’t like it because the customer base wants stable and fixed pricing, and we can’t offer it in the market today. [This] forced the conversation [about] whether we can use a different material for more stability…” the buyer concluded.

Focus article by Ciaran Tyler

Pictured: Chinese workers use expanded Polystyrene (EPS) foam to build houses. (Source: Imagine China/REX/Shutterstock)