The recent string of shutdowns at U.S. styrene plants bodes well for the domestic polystyrene market. But even producers are wary of describing a potential upturn as anything other than temporary.
At a time when prices for most polymers are on the downswing, polystyrene prices actually appear to be moving up. The 3 cents a pound price increase announced by producers has been targeted by some for February and by others for March. Whether it will stick as early as this month remains to be seen, but "a 3 cent increase March 1 is going to be a reality," as one producer
put it.Such confidence, expressed by a number of suppliers, is due in no small part to what is happening right now in the styrene market. Last week's accident at Huntsman Chemical's 1.1 billion pound a year styrene plant in Baytown, Texas, is the latest of several outages at styrene plants in the Gulf. The Baytown outage has forced Huntsman to put its styrene and polystyrene customers on 50 percent allocation.
According to one supplier, every styrene plant in the Gulf except one - Dow's Freeport plant - lost some production because of the exceptional cold weather in late December and early January. Sterling Chemical is reportedly still down and allocating heavily to its customers through February.
As a result, spot prices for styrene have been all over the board in recent months, from less than 30 cents a pound in late 1989 all the way back up to around 50 cents a pound and even above in the early part of this year.
However, the longer term effect on styrene and polystyrene prices is likely to be lessdramatic. Huntsman has already purchased or traded all the
ethyl benzene it says it needs to replace the production knocked out by the fire. The company also has reportedly restarted its styrene unit - which was undamaged - with the intention of bringing it back to near full capacity in a week or so.
Meanwhile, styrene spot prices appear to be drifting back down to between 40 cents and 45 cents a pound, close to the 38.5 cents a pound reportedly announced by most U.S styrene producers for February.
Part of the reason for the falling prices is competition by certain producers for a larger share of the domestic market. Although there are a few maintenance shutdowns scheduled for the first half of this year - including a month-long one at Bayport - it seems some suppliers are looking beyond that to when new capacity will be coming on stream.
Huntsman, for example, hopes to come out of its May turnaround with some 200 million pounds a year of new styrene capacity and Chevron is expected to bring on new capacity in 1991.
The outlook for polystyrene is equally mixed. If the 3 cents a pound increase goes into effect as expected in the next month, that would push up list prices to around 49 cents a pound for general purpose polystyrene, with some spot prices quoted around that level or even above 50 cents a pound already.
But "in the long term we see a lot of monomer on the marketplace," concedes one polymer producer, "so deep down I think there will still be downward pressure."