2005 was a difficult year for Polystyrene
as per CMAI, the leading market research organization.
The growth of Polystyrene as well as EPS in
2005 was negative mainly because of lower
demand from the largest market- China. 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.
In the forecast period for the next 5 years,
prices are expected to ease, causing demand
growth rates to improve. High propylene values
are likely 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.
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.
EPS demand in 2005 is expected to post slower
growth due to significantly diminished demand
into China's construction sector. Demand for
EPS into packaging applications has also slowed
due to a shift to paper. In North America
and West Europe, growth into the packaging
sector has declined, however growth into 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 own
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 imports of cost competitive EPS
from Asia have increased.
EPS profitability has been much better than
PS due to its growth patterns. EPS is at a
different stage in the product lifecycle and
does not face the same issues as a mature
product, such as polystyrene
