Environmental problems will affect the demand of PS raw materials

 

Driven by healthy demand and declining production in the fourth quarter of 2020, the PS market is expected to experience tight supply in early 2021. However, uncertainty about the impact of the new coronavirus pandemic, new capacity in Asia and concerns about the environment may further put pressure on the market.

 

Consumer goods are the key to PS growth in Asia

 

Driven by the demand of China’s end users, the Asian PS market will begin to recover in the second half of 2020. China’s supply and demand dynamics will largely determine the market direction in 2021. The production capacity of consumer products will continue to grow, and the demand will maintain a good trend.

 

Under the control of Xinguan epidemic in China, more and more orders from other regions have been received by PS end users, which is mainly due to the strong growth of the refrigerator industry, which is expected to continue.

 

In addition, the soaring price of ABS may also lead to the increase of PS demand. According to global Proctor energy information data, the premium of CFR China ABS spot price over hips in November was about $600 / T, far higher than the premium range of $250-300 / T in the first half of 2020. As the price gap widens, sources expect more buyers to switch to PS to save costs, which will cause a shortage of supply.

 

However, given the great uncertainty of the current epidemic, further demand growth, both domestic and export, will depend on the global economic recovery.

 

With higher profit margins, producers will continue to produce at high opening rates. However, supply constraints are unlikely to ease in the first half of 2021 due to excess orders and the production line of DENKA Singapore of 200000 tons / year shut down in February.

 

It is estimated that 1 million tons / year of new production capacity will be put on line in 2021, including 300 thousand tons / year unit of SP chemicals and 400000 tons / year of Zhejiang Yisu Plastic Co., Ltd., but there is also the possibility of construction delay, which may limit supply growth and support the Asian market in the short term.

 

US economic growth novel coronavirus pneumonia

 

The decrease of supply and the rise of upstream price indicate that the US PS market will usher in a strong start in the first half of 2021. The closing of a production line in the fourth quarter led to tight supply, coupled with higher seasonal demand, which ended in 2020. Novel coronavirus pneumonia is expected to face some obstacles despite its support factors, but due to the uncertainty of the recovery of the new crown pneumonia epidemic. The virus has a considerable impact on the economic growth of the United States, which is closely related to the demand for PS, because the slowdown of economic growth leads to the decline of consumption capacity, and consumer goods are the main application areas of PS.

 

On the positive side, if the styrene and benzene markets are more balanced as expected, U.S. producers are expected to see costs fall in the first quarter of 2021. In addition, the sources expect that the new styrene capacity in Asia will lower the price, which will help to reduce the production cost of PS.

 

According to the source, before the pandemic, PS market demand is expected to grow by 1.5-2%,. The contraction in supply caused by a US producer shutting down its next line will have a nominal impact.

 

“It is likely to affect only a few spot transactions that are already minimal,” the source said. It is more likely that PS pricing will continue to follow the seasonal demand of the upstream market. ”

 

Looking forward to the future, renewable and circular economy will continue to play a role on the basis of PS. Manufacturers in the United States and Europe will continue to vigorously promote the production of recycled materials.

 

European manufacturers want to add PS recycling solutions

 

As for the European PS market, it is expected that the opening of the first half of 2021 will be similar to that at the end of 2020.

 

In the past few years, the market interest in recycled materials has continued to grow, resulting in a decline in the demand for PS raw materials. But in 2020, the demand for white goods and online distribution will rise sharply, which will be greatly alleviated.

 

Recycling solutions will continue to be an important investment attraction for the market as public awareness of environmental issues continues to increase and the EU’s forthcoming one-off plastic ban will continue to drive demand for PS raw materials.

 

Tight supply at the end of 2020 supported prices, and the runaway demand in Asia in the fourth quarter led to a sharp rise in prices. Buyers in the market argue that tight supply will not last for a long time, attributing the situation at the end of 2020 to a number of plant overhauls and subsequent reductions in operating rates.

 

Exports are becoming a bigger target for European sellers and the market is likely to tighten further, with orders for hips in Asia reaching thousands of tons a month in 2021, according to one producer.

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