Industry Outlook & Drivers

Global Market Outlook on Polystyrene

• The global market is estimated to grow by 1.9 percent during 2019–2024. The lower growth rate can be attributed to the sluggish downstream demand especially from the packaging segment.
• The packaging segment has reduced the usage due to its issues with sustainability. Multiple states in the US and Europe have banned its usage reducing its competiveness with other resins.

Industry Best Practices

Volume/ Minimum Order Quantity

• Direct buying is preferred for minimum order quantity of one or above truck load /rail load
• Low volumes may limit the benefits of direct buying for a CPG company
• One truck load Volume: 25 MT
• One Rail load Volume: 90-110 MT

Logistics

• Logistics management is one of the major cost component in the direct buying process
• Fuel cost, which is a major spend in transportation, is expected to be three times lower for rail cars over truck load

Process Complexity

• Producers may give preference to large convertors and distributors over CPG buyers
• However, CPG buyers can enter into long term contracts with producers with a minimum guarantee so that a steady business relationship is maintained over time

Global Market Size-Polystyrene

• The global polystyrene market is expected to grow at 1.9 percent during 2019–2024, driven majorly by downstream users, like construction and electronics. The global PS market is expected to reach $28.8 billion by 2024.
• The HIPS/GPPS market is driven majorly by the Asian market, which is expected to grow by 2-3% CAGR during 2019–2024
• The EPS market is driven by firm demand from the Asian market, which is expected to grow by 2-3% CAGR during 2019–2024, while mature markets, like Europe and North America, are expected to grow by 0-1% CAGR during 2019–2024.

Global Capacity-Demand Analysis

• Global production capacity for polystyrene* (HIPS and GPPS) is estimated to be around 14 million metric tons, with Asia accounting for about 54 percent of the total capacity
• Global production capacity for polystyrene* (EPS) is estimated to be around 12 million metric tons, with Asia Pacific accounting for about 70 percent of the total capacity
• The global PS market is expected to grow by 3– 4 percent during 2017–2022, driven majorly from downstream users, like construction and electronic
• The traditional market applications are rigid plastic packaging raw materials, food packaging, optical disk storage, disposable cutlery, foams, styrofoam, packaging, construction. It is also used in industries related to polymers, plastics, resins and thermoplastics.
• The demand is also driven by industries that use general purpose polystyrene, high impact polystyrene, styrofoam, expanded polystyrene and extruded polystyrene (XPS).

Market Outlook

Capacity Dynamics 

• Mature markets, like Europe, North America, and Japan, have witnessed capacity rationalisation, resulting in a total of 4–6 suppliers/region, while developing nations, like Middle East, China, and Taiwan have witnessed capacity additions. There are no major capacity reductions announced during 2019–2024

Demand Dynamics 

• The HIPS/GPPS market is driven majorly by the Asian market, which is expected to grow by 2-3% CAGR during 2019–2024

• The EPS market is driven by firm demand from the Asian market, which is expected to grow by 2-3% CAGR during 2019–2024, while mature markets, like Europe and North America, are expected to grow by 0-1% CAGR during 2019–2024

Engagement Outlook

• For CPG buyers with volume of 5,000–10,000 MT, one can look at direct buying from producers as a viable option
• Direct buying can reduce the overall sourcing spend of PS by 5–8 percent, as the margins between intermediaries, like distributors and convertors, get eliminated

Global Trade Dynamics

• North America: The region is a net importer of EPS and HIPS/GPPS resin. The imports of HIPS/GPPS witnessed a decline of 10 percent Y-o-Y during FY 2019 which can be attributed to the sluggish demand owing to the multiple state bans. Additionally, EPS imports also witnessed a decrease of 5 percent Y-o-Y during FY 2019, which can be attributed to the slowdown in demand from the overall decline in the economy.
• Europe: Europe is a net importer of PS. The trade deficit has reached at 0.7 Million MT in 2019 (up by 10 percent Y-o-Y).
• Asia: The region has a balanced trade flow for HIPS/GPPS resin while they are a net exporter of EPS resin. The trade surplus of EPS witnessed a decrease of 4 percent Y-o-Y during FY 2019.

Industry Drivers and Constraints

Drivers

• Food packaging demand in Asia: Food packaging accounts for 25–35% of the total demand. Increase in packaged food demand, rising demand for food containers, and disposable cutlery in Asia are expected to be the key drivers in the coming years.
• Appliances demand in Asia: Increase in disposable income is likely to drive the home appliances demand from the Asian markets. The consumer electronics is a major driving segment, which is expected to grow by 6-8% CAGR by 2024.
• Construction demand Increase in global temperature may also push the demand for heat insulation materials like polystyrene in the coming years. This segment is likely to witness a steady growth rate of 2–3% from 2019 to 2024.

Constraints

• Capacity reductions: Total Petrochemicals plans to shut their 110,000 MT/YR by the end of FY 2019. The plant is located in Spain while INEOS Styrolution plans to reduce ~ 50,000 MT/YR of its capacity by replacing it with ABS. This is expected to be operational by FY 2020.
• Delay in feedstock styrene capacity additions: In the past years, styrene monomer prices have been driven mainly by supply-demand dynamics, which in turn prompted the PS prices. Sinopec-SK (Wuhan) Petrochemical Company is planning to start its 27,000 MT/YR styrene monomer (SM) plant in FY2019. Capacity additions of ~5 MMT/YR were expected to come online by H2 2018 To H1 2019 however the delay in construction means these plants would be operational only by FY 2020. Styrene has a very high correlation of 0.83 with HIPS and GPPS. Thus any major change in the feedstock price can be expected to be reflected in polystyrene market price.

Innovations

With stricter regulations in place, the emphasis on a lot of packaging companies has been to recycle and create more biodegradable products that would not harm the environment. Recyclable Polystyrene One of the packaging vendor named Cascades have created a polystyrene foam tray that contains 25 percent recyclable material The packaging named EVOK would be first to be manufactured in the US following its introduction in Canada

The usage of such products would help reducing greenhouse emissions by 15 percent and it will also reduce the amount of waste sent to landfills As a result, this packaging requires 6 percent less usage of material along with an annual decrease of 120,000 pounds of waste per year