Excess PS, EPSExcess PS, EPS

While PS demand has increased in China from 2000 to 2005 by more than 700,000 tons, decreases in the rest of the world over that time and boosted capacity have created an extreme oversupply of the material. That''s the finding of global petrochemical consulting firm Chemical Market Assoc. Inc. (Houston, TX) in its 2006 World PS/Expandable Polystyrene (EPS) Analysis, which provides history and prognostication from 2000 to 2010.

CMAI believes that as prices ease due to over capacity, demand will increase. In addition, high propylene values will make PP less viable from a price perspective versus PS. Benzene, of which half is used in styrene production with half of that styrene going towards PS, has seen prices fall of late, leaving higher crude oil prices as the lone driver for price increases.

CMAI points out that PS trade moves in a North/South fashion so that excess capacity in North America might end up Brazil, but isn''t likely to cross over to Asia or vice versa. This is largely driven by the fact that it''s cheaper to ship styrene monomer, which is a liquid, than PS. In addition, tariffs, logistic costs, and technical support prevent PS from being fungible on a global basis.

EPS demand is expected to slow in 2005, due in large part to a slowdown in China''s construction sector, where the foam is used as insulation, molds for cement, and moorings for large architectural structures. Increases in construction applications in North America and Western Europe have boosted EPS while its use in packaging declines. CMAI feels that China and Asia in general have been adding EPS capacity at a rate that local demand cannot sustain. That excess is being shipped around the globe, including to North America, where EPS demand in 2005 was strong.-Tony Deligio; [email protected]