Predicting market trends, polystyrene-style

Material suppliers monitor their key markets closely, devoting time and resources to this specific function. IMM thinks molders, moldmakers, and OEMs can all benefit from this "gold mine" of information. Recently, we asked Kevin McQuade, director of sales and marketing for BASF Polystyrenes, to give our readers some insight into the shifting dynamics among markets where PS is a major player.

McQuade, formerly of Mobil Chemical Polystyrenes Group, prefaced our market discussion with a look at the current picture for polystyrenes. "Globally, demand for PS is growing, but capacity increases are greater. The result is lower prices and plenty of inventory," McQuade says. This may account for a trend toward substituting high-impact polystyrene (HIPS) for such higher-priced resins as ABS.

Polystyrene plays a major role in consumer electronics, office equipment, medical, and toy markets. From BASF Polystyrene's viewpoint (it is the number two producer globally), here are the factors making these markets tick, along with some predictions for their growth over the next five years.

Consumer Electronics/ Office Equipment
McQuade defines this category as a major focus for PS, one that includes molded components for printers, PCs, and audio and video equipment, as well as televisions. "We see a lot of production shifts to Mexico in the maquiladora areas for such companies as HP, Epson, and Asian electronics manufacturers." Looking at the total market for these products, McQuade predicts 3 percent annual growth for consumer electronics and 2.6 percent for office equipment. As a subset, however, the computer segment shows far greater promise. Printers are registering predictions of 6 percent growth while PCs post a 16 percent rate. "We now have specialists working on application development with OEMs on these products because the growth is so explosive."

This category also offers a growth opportunity for PS substitution, and BASF has been working with OEMs and custom molders to help make this happen. Printers, fax machines, and keyboards, for example, have switched from flame-retardant ABS to nondecabrominated, flame-retardant HIPS. The next logical step would be HIPS for monitor housings. "Obviously, these competitive markets are subject to price pressures, and initial materials were somewhat overspecified. For example, the lifetimes of these units are, realistically, just 18 to 24 months. But when designed initially, product life was estimated to be much longer. Drop testing was routine, yet desktop PCs are rarely dropped."

The current price wars on PCs have also motivated OEMs and designers to look at ways of taking cost out of the product. "One avenue custom molders can take to win business," McQuade advises, "is to suggest cost-reducing measures via materials substitution and design."

Audio/Video Disks
Before jumping to conclusions about PS being substituted for PC in compact disks, know the audio/ video application referred to here is the CD jewel box. McQuade admits this is a tough market, utilizing crystal (or general-purpose) polystyrene, in which price competition reigns supreme. Cost has come down by 50 percent during the last two years.

"Resins must have high lot-to-lot consistency to meet the automated molding conditions," he said. "In addition, there are scratch-resistance tests and customer expectations that must be met." Growth rates here are unpredictable as they depend on consumer spending and whether or not the music industry is releasing popular new music. BASF sees variable annual growth rates up to 10 percent.

Medical Goods, Toys
"We've seen good growth for molded PS in medical disposables such as petri dishes, pipettes, and sample containers," McQuade says, "with anticipated annual growth rates of 5.2 percent through 2002. For transparent grade applications, where crystal PS is used, it can be as high as 7 to 8 percent." More movement toward disposables in health care is helping fuel this growth. Cost is a key issue here as well, so general-purpose (GPPS) grades (from the 3 to 20 melt-flow range) fit well. GPPS is used at a 4:1 ratio over HIPS in this market.

With a great deal of the toy market now moving to or located in Asia, BASF predicts annual growth for the toy market at a relatively low 2.7 percent. "Low-cost imports from Asia and elsewhere continue to infiltrate the NAFTA market while production drifts to Asia and, now, Mexico."

Demand and Capacity
On average, BASF predicts a 16 percent increase in worldwide PS capacity during the next three years with demand reaching 6.5 percent by 2000. "That means NAFTA countries will be using 89 percent of the available capacity while Asian nations will consume only 60 percent if capacity increases as planned."

Asia's current crisis, reasons McQuade, may delay these capacity increases and accelerate older plant shutdowns based on predictions of soft demand. "No one truly knows if the worst of the Asian crisis is over, but taking a three- to five-year look at conditions, we feel, at the least, overbuilding will not occur," he added. Consolidations in Japan among PS producers are also well underway, according to BASF's research, and new capacity may be mothballed until there is a change and these projects become beneficial again.