CMAI sees no relief for oversupply in world polystyrene market

Chemical Market Associates Inc., Houston, said the world polystyrene demand has declined for 2 consecutive years and oversupply will continue.

Nov. 26, 2001

2 min read

By the OGJ Online Staff

HOUSTON, Nov. 26 -- Chemical Market Associates Inc., Houston, said the world polystyrene market is in a down cycle.

The recently completed 2002 World Polystyrene/EPS [expandable polystyrene] Analysis focuses on the 1996-2006 period, said CMAI.

"The legacy of the 900,000 ton imbalance between capacity and demand growth in 2001 holds operating rates down throughout the forecast period to 2006. Having previously been in need of new capacity for future years, the huge demand setback in 2001 means the polystyrene industry is in need of rationalization," said CMAI.

"World demand fell by 2.5% in 2001 after a decline of 0.1% in 2000. China is the only large market to grow in 2001, with an increase of 3.6%, while the rest of the world fell by 4%," said CMAI.

The group predicts that demand growth will resume in 2002, "though at a subdued rate." However, capacity will increase at the same pace, keeping operating rates depressed.

Polystyrene profitability in 2002 will be low again, predicts the group. It said a temporary demand surge to rebuild stocks could occur, but that there is plenty of unused capacity.

"CMAI is discounting any speculative inventory surge that would artificially inflate demand. On the basis of very depressed operating rates for polystyrene and styrene monomer, there is very little chance that a perception of short supply could develop any time soon. The world average operating rate of 75% in 2001 is significantly lower than previous market troughs," said the group.