Prices will flatten despite pending price hikes
By Staff -- Purchasing, 1/15/1998
Domestic polystyrene prices will remain flat through the first quarter, even though producers are in the midst of trying to boost tags by 3(cent)/lb. "Despite some reasonable gains in demand, polystyrene prices are unlikely to advance," says Earl Simpson, industry analyst at The Pace Consultants, Houston, Tex. "Supply and demand fundamentals make it appear any price increase achievement will be difficult."U.S. bulk prices for general-purpose grade polystyrene reached a low of 32(cent)/lb in December, according to Purchasing's monthly survey of chemical buyers. That's down from a high of 56(cent)/lb in the second quarter of 1995. New capacity and slowdowns in exports have kept downward pressure on domestic polystyrene prices for almost three years.
The downward momentum, however, is just about over despite the fact that consumption remains weak and capacity utilization hovers around 75%. Why? Profit margins for polystyrene are cut to the bone, and prices for polystyrene's raw material, styrene, are forecast to decline just slightly in 1998. In October, calculated cash margins were negative 3.5(cent)/lb for crystal-grade polystyrene producers who bought styrene, according to Pace. For the same month, integrated polystyrene producers were doing only slightly better.
With styrene prices also bottoming out, domestic prices for polystyrene will flatten. Buyers forecast U.S. bulk prices for general-purpose grade material will fall to an average of 33(cent)/lb on contracts and 32(cent)/lb on spot purchases in the first quarter. By the second quarter, all tags will average 32(cent)/lb. In the third quarter, seasonal demand could push prices up to 33(cent)/lb, at least temporarily.
In addition to weak styrene prices, supply/demand imbalances have helped depress polystyrene tags. A number of producers have added or are planning to add new capacity. Among them, Chevron Chemical boosted capacity at its Marietta, Ohio, plant by 250 million lb/yr in April. basf is building a 240 million lb/yr high-impact polystyrene line at its facility in Joliet, Ill. The new unit will start up in the third quarter.
In other polystyrene supplier news, Nova Chemicals is expanding its polystyrene technical and research facilities. The new facilities, located at the company's Monaca, Pa., polystyrene complex, will include a pilot plant and expanded development and technical service laboratories. The facility will consolidate Nova's existing Leominster, Ma., and Newtown Square, Pa., pilot plants.
Last year, Huntsman purchased Amoco's 330 million lb/yr polystyrene business, including plants in Joliet and Willow Springs, Ill. The acquisition boosted Huntsman's total domestic polystyrene capacity to 1.5 billion lb/yr.
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