As per a recently completed report on the market scenario of global Polystyrene business by CMAI, 2005 was a difficult year for Polystyrene. The growth of Polystyrene as well as EPS was negative mainly because of lower demand from China - the leading consumer of PS and EPS globally. Higher prices of feedstocks also did not augur well and extensive capacity additions created further problems. Changes in consumer technologies away from VCRs, CDs and CRT TVs are also depressing consumption growth in the oldest major thermoplastics. The 2004 structural shortage of styrene in Asia and high prices created by benzene, tightened the regional PS export market. A similar slowdown was expected in 2005, but the slowdown in demand mitigated this potential.

About half of all benzene production is consumed by styrene production, and half of styrene production is used to make PS. In the forecast period upto 2010, CMAI believes that prices will ease, causing demand growth rates to improve. High propylene values are expected to make polypropylene less attractive as a competing resin. However, demand will be even lower than CMAI's current forecast if crude oil prices remain at current high levels. Now that benzene tightness has eased, crude oil remains the primary driver of sustained high prices for PS.

EPS demand in 2005 is expected to post slower growth due to significantly diminished demand from China's construction sector. Demand for EPS in packaging applications has also slowed due to a shift to paper. In North America and West Europe, growth in the packaging sector has declined, however growth in construction applications has made up the difference. Unlike many products, EPS demand is growing in almost every corner of the world. Asia, particularly China, has been adding EPS capacity at an incredible rate. Operating rates should remain relatively low. The fear of overcapacity exists in China, as its domestic demand has slowed, and imports might become more competitive. The excess EPS capacity in China, as well as the rest of Asia, is resulting in EPS being shipped to all corners of the world. In 2005, EPS demand in North America has been very strong, yet production has not, as cost competitive imports from Asia have increased. EPS is at a different stage in the product lifecycle and does not face the same issues as a mature product, such as polystyrene and hence EPS profitability has been much better than PS due to its growth patterns.