Business
Recovery drags for thermoplastics Profitability faces another hard year with low capacity use in polyethylene, polyvinyl chloride, polypropylene, and particularly polystyrene Producers of leading U.S. thermoplastics had uncommonly good foresight about 1981 a year ago, although they probably now regret it (C&EN, Oct. 6, 1980, page 10). For 1982 and beyond, unless these companies considerably alter current plans, it's a good bet that a host of problems will forcibly rearrange this critically important product group by 1985. A year ago, producers of these plastics—low-density polyethylene, polyvinyl chloride, high-density polyethylene, polypropylene, and polystyrene, in order of production volume—worried that reinvigorated U.S. interest rates would throttle back the whole recovery for much of 1981. Producers couldn't have been much more correct, except that now the whole year could go flat. For 1982, industry analysts expect many of 1981's problems to be still around. Overcapacity at plants,
slowing demand growth rates, and buyer resistance to price increases will keep profitability increases below what producers believe they need for future investment. On top of this, new problems may develop, notably a rising tide of imports priced lower than merely competitive. The giant U.S. thermoplastics business, the chemical industry's best large growth area through the years, badly needs better profitability, producers say. At stake is combined production worth $11.3 billion in 1981. In the past, high profits justified large investment in new plants with lower unit production costs. Profits also produced a host of variations in polymers' physical properties, aiding market takeovers from metals, paper, wood, and other materials. In addition, waves of research and development money have brought outstanding technology improvements. The most important recent technical breakthrough, originally Union Carbide's and Dow Chemical's revolutionary low-cost processes for "linear" low-density polyethylene, has moved well into commercialization. The current profitability slump suggests future loss, even if temporary, of the U.S. plastics business's competitive edge. Telltale signs of a
difficult profitability situation come from simple statistics on production and capacity. In 1981, assuming no sudden decline in the economy and higher production late in the year, total production of the five leading thermoplastics might not quite match peak production in 1979 of 26.7 billion lb. In between, production dropped 9% to 24.3 billion lb last year. The net decline in production over 1980 and 1981 from 1979 levels will total 2.5 billion lb, perhaps more. At the same time, combined plant capacity for these five thermoplastics has increased 8.4% from 30.9 billion lb in 1979 to 33.5 billion lb in early 1981. Much more capacity, especially for linear low-density polyethylene and polyvinyl chloride, will be coming on through 1985, according to announcements from companies. The result from 1979 through 1981 is that these thermoplastics' capacity increased 2.6 billion lb per year whereas output went down temporarily by almost the same amount. Obviously, profitability suffered, as did operating rates, going from 86% in 1979 to 79% in 1981. A closer look at coming events for production and capacity for the individual polymers discloses major problems developing for some of
Plant use in 1981 will recoup about half the drop in 1980 Production as % of first-quarter nameplate capacity 100
1979 80 81 Low-density polyethylene
1979
80 81 Polyvinyl chloride
1979 80 81 High-density polyethylene
1979 80 81 Polypropylene
1979 80 81 Polystyrene
Sources: Industry and C&EN estimates; Ernst & Whinney for the Society of the Plastics Industry's committee on resin statistics
Aug. 31, 1981 C&EN
13
Business them. Some polymers, for example polyvinyl chloride and polystyrene, appear to need no additional capacity from now through 1985, even assuming an optimistic growth rate in demand. In the others, demand might match or exceed current nameplate capacity in 1985. But announced expansions likely will keep capacity well above demand even for these polymers. Polyvinyl chloride is the worst case. In 1981, production may not get back to the 1979 level of 6.1 billion lb. Nameplate capacity as 1981 began was 7.8 billion lb. Taking the high side of producers' growth range of 2 to 3% annually through 1985, production in 1985 will reach about 6.8 billion lb. This will be 1 billion lb under 1981 capacity. But, about 3 billion lb of annual capacity either has come on stream in 1981 or is due on stream by 1985 for polyvinyl chloride. Polyvinyl chloride plants, if they all still are producing in 1985, would have to operate at 63% of capacity in contrast to 77% in 1981. The 1981 rate is itself considered low for these plants. Polystyrene has a similar situation, though possibly not so bad. Assuming a generous 4% annual growth rate, production in 1985 will be close to 4.5 billion lb, up from an estimated 3.8 billion lb for 1981. Fortunately for polystyrene, little capacity addition is expected, perhaps as low as 300 million lb per year. This would bring 1985 capacity to 6.0 billion lb. The resulting operating rate, with no capacity shutdowns, would be 75%, up from 67% in 1981 but still well below historic levels.
Even the relatively high-flying low-density polyethylene might experience a drop in capacity use over the next few years. Assuming a 5% annual growth rate for the largestvolume thermoplastic, production in 1985 could reach 9.5 billion lb. Announced capacity expansions could bring the total in 1985 to 11.3 billion lb. The operating rate then would be off slightly at 88% in 1981. What does the potential slump in operating rates based on these assumptions mean for thermoplastics in the longer term? Clearly, the slump won't be so bad as simple calculation suggests from current information. Producers certainly will take steps to avoid lower rates. They undoubtedly will have shut down some present capacity for polyvinyl chloride and polystyrene by 1985. Some capacity may even be scrapped by then. In other words, some shut-down units may never restart despite initial claims to the contrary. The amount of capacity shut down will exceed by quite a bit any decline in capacity. This will result from continued technological evolution, in which new reactors and catalysts add to capacity at existing plants, especially in polypropylene and polyvinyl chloride. At this time, how much capacity will be shut down, and how much of this will be offset by improvements is anyone's guess. Some industry analysts indicate that enough units will be shut down to keep operating rates at a minimum of about 75% of nameplate capacity or higher, even in recession years. Efforts to keep operating rates at profitable, or even marginal levels,
Thermoplastics exports decline in 1981 after small gain in 1980 % annual change
•
100 75
j
50
25 0
1 I
jriil
•*u
-25 1979 80 81 Low-density polyethylene
1979 80 81 Polyvinyl chloride
1979 80 81 1979 80 81 1979 80 81 High-density Polypropylene Polystyrene polyethylene
1979 80 81 Total
Sources: Industry and C&EN estimates; Ernst & Whinney for the Society of the Plast ics Industry's committee on resin statistics
14
C&EN Aug. 31, 1981
could become difficult in the future if the import-export picture changes as some analysts expect. Rising U.S. raw material hydrocarbon prices slowly are wiping out the advantage U.S. thermoplastics have had in world markets. U.S. exports of thermoplastics will decline almost across the board this year after a long period of growth. At the same time, there are indications that new imports are coming to compete with U.S.-produced thermoplastics. The import threat seems stronger for fabricated plastics items than for the resins, but the volume loss for U.S. resins will be parallel. Nearby countries with large supplies of light raw material hydrocarbons produced from newly developing fields of natural gas such as in Canada and Mexico are potential export boosters of plastic items to the U.S. Export incentives in these countries could be devices to, in effect, lower polymer prices for fabricators. These incentives might be enough to more than offset relatively high shipping costs to U.S. markets for many possible fabricated plastic items. As they have in the past, U.S. producers of thermoplastics will have to cut the cost of resins to consumers to compete. Even now, price pressures are severe, resulting in widespread discounting from list prices. Big discounts apparently are keeping export sales from falling more than they have. But pricing can help sales just so long before profits are gone. Then the only alternative is to improve plants or shut them down. Price pressure probably will cause many old, inefficient plants to be shut down and some expansion programs to be deferred. Therefore, the rise in capacity and decline in capacity use will be significantly less than the current exercise on paper indicates. A tempering effect is developing, according to one industry analyst. Changes generally will be less drastic than supposed. Big capacity increases will be deferred, prices will be increased to cover costs, and production changes will be smaller than might be expected from yo-yo outside influences, such as shifts in the number of housing starts or automobile production. All these things are signs, along with the lowering of growth rate forecasts, of a maturing in the plastics industry. For details on the immediate outlook for these thermoplastics, see the following pages. Bruce Greek, Houston
Key Polymers ~fcH 2 -CH,l·
Low-density polyethylene • Demand recovering • Capacity edging up • Prices firm PRODUCTION/CAPACITY Billions of lb
1979
1980
1981
a Includes linear low-density polyethylene. b First quarter.
HOW MADE Polymerization of ethylene at high and low pressures aided by initiators and catalysts
MAJOR FABRICATED FORMS (U.S.) Film, largely for packaging, 65 % ; injection molding 10%; coatings 10%
FOREIGN TRADE Exports—may fall a bit after exceeding 1.1 billion lb in 1980, imports—negligible
PRICES Most large-volume grades listed between 46 and 48 cents a lb; discounting still going on
COMMERCIAL VALUE $3.3 billion for total 1981 production
U.S. producers of low-density polyethylene expect 1981 production to return to 1979 volume after a 6 % drop in 1980. This isn't exciting news, but it helps make low-density the most fortunate of the major thermoplastics in a decidedly unexciting year. This means, of course, that low-density polyethylene has had no new growth in two years, like most other thermoplastics and, in fact, most other major organic chemicals. In 1981, polyethylene production will total about 7.8 billion lb, the same as in 1979, up 6 to 7 % over 7.3 billion lb in 1980. The forecast for 1981 ranges from 7.7 billion to 8.0 billion lb. The top predictions hinge on a very strong fourth quarter, buoyed by sales expectations for fabricated products following the new tax cut. The less optimistic views hold that the impact of the tax cut on low-density polyethylene will take longer to appear. Some indication may come in the fourth quarter, especially if retail sales growth significantly exceeds inflation. However, for the sales pull in the product pipeline to get back to the polymer producers, at least another quarter may be needed. If this view is correct, a sales surge is in the offing for early 1982. For 1981, if production of low-density polyethylene totals 7.8 billion lb, existing plant capacity will run at an average of 8 8 % of the nameplate total for the year. This production rate, although high compared to plant use rates for many other polymers and chemicals, doesn't tell the whole story. This summer, production rates fell steeply, following relatively high rates of the late winter and early spring. Now a recovery appears to have begun. Later on, especially if production is to reach 8.0 billion lb this year, use rates will have to be near the practical operating limit of not much over 90%. In 1981, the gain in capacity for lowdensity polyethylene will be small, probably a net of 200 million to 300 million lb to a nameplate total of about 9.2 billion lb. Much of the addition will be so late in the year that it will contribute little to total production. At the same time, some capacity, such as the small Union Carbide plant at Torrance, Calif., has been shut down. In 1982, capacity will increase more
as new plants come on stream and more conversion is completed on existing plants to the revolutionary linear lowdensity polyethylene. However, these expansions will do no more than keep up with forecast demand growth for 1982 if the economy responds as expected to the tax cut and to military spending gains. How plant operating rates run this year could influence exports, which took a relatively high 15% of production in 1980. If demand for low-density polyethylene increases in the U.S. as expected later in the year and prices hold at current levels or increase, exports probably will fall off slightly. In 1980, exports were 1.15 billion lb, according to data compiled by accountants Ernst & Whinney for the Society of the Plastics Industry's committee on resin statistics. So far 1981 exports have dropped slightly from year-earlier levels. The decline may accelerate as sales in the U.S. improve and recessions continue in many foreign countries, causing these countries to cut consumption and push exports. Improved U.S. sales of low-density polyethylene would not change the end-use pattern appreciably. Low-density's great strength in packaging markets will keep film at nearly two thirds of U.S. use. Of the other major end uses, injection molding may slip in percentage share because of substitution by other polymers in containers, including caps and lids. Film's dominant position seems unlikely to be broken because all of its current uses continue to grow at least as fast as population. For many uses, the growth rate remains much higher even though industry forecasts have called for a decline. For example, demand for trash bags has yet to slacken. New uses for film still are expected, especially as more linear low-density polyethylene comes to market. Some industry analysts expect a new jump in film use if construction returns to past levels from its current slump. Some shifting to other uses occurred as construction slowed in the past two years and fabricators sought new markets to keep their plants running. However, construction shows no signs to date of providing such a boost in 1981.
Aug. 31, 1981 C&EN
15
Key Polymers
CHo—CH C
Polyvinyl chloride • Demand reviving • Capacity due up • Prices very low PRODUCTION/CAPACITY Billions of lb 8
1979
1980
1981
a First quarter.
HOW MADE Polymerization of vinyl chloride by suspension, emulsion, or mass processes using initiators such as peroxides
MAJOR FABRICATED FORMS (U.S.) Extrusions, more than half in pipe, 60 % ; calendered sheet and film 10%; coatings 10%; moldings 10%
FOREIGN TRADE Exports—rising a bit to about 500 million lb in 1981, imports—negligible
PRICES List price 32 cents a lb, higher for specialty grades; much discounting, especially on exports
COMMERCIAL VALUE $1.9 billion for total 1981 production
V 16
C&EN Aug. 31, 1981
Although 1980 was bad for polyvinyl chloride, production by the end of the year wasn't quite so depressed as once feared. In 1981, production will be improved, but not quite so much as once hoped. After a good start through the spring in 1981, polyvinyl chloride production has been lower than expected this summer. Industry analysts now call for 1981 production of about 6.0 billion lb, up 9 % from 1980. Some put 1981 production above 1979's record 6.1 billion lb, up to 6.2 billion lb. This would require a good fourth quarter, resulting from rising consumer spending and increased construction activity. Polyvinyl chloride is singular among major thermoplastics in its strong dependence on construction markets. Other analysts are not so optimistic. They agree that there is pent-up demand to be filled, but they believe that consumers will wait until 1982 to pick up ordering. The resulting weak third quarter and so-so fourth quarter in 1981 won't allow full production recovery to the 1979 level. Even if polyvinyl chloride production does match or exceed 1979's level this year, producers still will not have a good time of it. Plant capacity has increased at least 12% over the past two years, even though 1979 capacity was more than adequate to meet demand. The unfortunate result is that existing capacity of 7.8 billion lb at the beginning of 1981 will run at an average rate of 7 7 % for the year, well down from a solidly profitable 8 7 % in 1979. To make the situation worse, as much as 700 million lb per year of additional capacity will be completed this year. Some of this expansion will come as new units, such as Shintech's outside Houston that will double capacity to 660 million lb per year. Many of the expansions will be small ones, however, largely debottlenecking or additional or improved reactor systems. After 1981, an even greater amount of new capacity is due—most notably B. F. Goodrich's 1 billion lb-per-year giant at Convent, La., in 1983. Smaller new units are due elsewhere in 1982 and 1983. These capacity increases loom at a time when demand is slack. Demand has declined a total of 600 million to 700
CI million lb in 1980 and 1981. This figure shows clearly the most basic problem for polyvinyl chloride—vanishing profitability. Current list prices for polyvinyl chloride sold in large volumes for major markets such as pipe and fittings have just returned to year-earlier levels. Average real-market selling prices, including export prices, also are probably up from last summer's recession. The average polyvinyl chloride selling price, according to industry observers, has not risen nearly enough in proportion to cost increases for raw material vinyl chloride. For producers integrated backward, polyvinyl chloride price increases have not risen in proportion to cost increases in original raw material ethylene and chlorine. In addition, all of the other-than-raw material components of production cost have gone up with inflation. With capacity growing faster than demand and cost increases coming in all production components, the outlook seems to be for a producer shakeout. In a way, some of this has happened already as companies have sold off polyvinyl chloride plants. Most of the buyers, however, still are operating the plants, so there is no change yet in industrywide capacity. Plants with small reactors look at first like good shutdown candidates. But in practice, producers may just replace these reactors with bigger reactors, adding to nameplate capacity. The near-term outlook for demand isn't good. The high growth rates of the 1970's have yielded to forecasts of 3 to 4 % growth per year, the better figure when construction resurges. Construction in its many facets takes most polyvinyl chloride product types, made by extruding, calendering, molding, and so on. Hence, while construction is flat, polyvinyl chloride production will tend to be low. The background economic problem, high U.S. interest rates which hold down construction activity, also holds down sales in other, smaller-volume end uses of polyvinyl chloride such as automobiles, appliances, and home furnishings. Until the outlook improves for these durables markets, polyvinyl chloride producers will suffer smaller product volume than their invested position needs.
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Key Polymers
-fcH,-CH,]-
High-density polyethylene High-density polyethylene producers still expect one of the better performances among U.S. thermoplastics this year, with full production recovery from the 1980 recession. However, it will take a strong second half to see this forecast come true, since high-density polyeth ylene had a weak first six months. PRODUCTION/CAPACITY In 1981, producers insist that output of high-density polyethylene will top 5 Billions of lb billion lb, matching 1979. In 1980, pro duction fell to 4.4 billion lb, tying poly Production styrene for the worst percentage decline Capacity· among major thermoplastics. If 6 % per year is a conservative es timate for long-term growth for highdensity polyethylene, then over the past two years some 1.5 billion lb of pro duction has been "lost." The shortfall consists of the decline in 1980 and no new growth for two years. Still, high-density polyethylene pro ducers are better off in their plant op erating rates than are producers of other major thermoplastics except for lowdensity polyethylene. Even with added 1979 1980 1981 plant capacity in 1980, the average a First quarter. 1981 operating rate will be about 83% of nameplate capacity of 6.0 billion lb per year in the first quarter. This oper HOW MADE ating level is a slight improvement over Polymerization of ethylene catalyzed 1980, when capacity of 5.6 billion lb ran by metallic salts and alkyls at about 82%. In 1979, the rate was 91 %, nearly the practical limit for this resin. MAJOR FABRICATED FORMS So far in 1981, production of high(U.S.) density polyethylene is up less than first forecast at an annual rate. Through June, Blow molding, mainly containers, the gain was just 5.3% over the same 40 % ; injection molding 25 % ; pipe period last year, according to data and conduit 10 % ; film 5 % compiled by accountants Ernst & Whinney for the committee on resin FOREIGN TRADE statistics of the Society of the Plastics Industry. Earlier in 1981, production ran Exports—declining slowly to about behind 1980. Recovery gained mo 500 million lb in 1981, imports— mentum in the spring, may have faltered negligible this summer, but will renew in the fall and carry into 1982, says one analyst. As with other thermoplastics, the PRICES outlook is for stronger demand in 1982 List price 45 to 49 cents a lb for large for high-density polyethylene. About the volume; discounting extensive only large outlet expected to decline next year is exports. Although overall annual growth will fall below the 1981 COMMERCIAL VALUE initial recovery rate, production probably $2.25 billion for total 1981 production will increase 6 to 8% in 1982, analysts say, barring a major recession. Hence, most of the growth will be domestic. Exports are falling this year as
• /Demand recovered • Capacity up again • Prices weak
ρ
18 C&ENAug. 31, 1981
U.S. hydrocarbon costs rise toward world levels, and exports are expected to continue to fall as feedstock costs in the U.S. become about the same as the rest of the world over the next several years. New capacity outside the U.S. also will tend to push down U.S. exports as worldwide profitability sinks. In the U.S. the demand recovery for high-density polyethylene seems to be occurring across the board. As a result, the use pattern will stay much the same. Blow molding markets for products such as bottles will continue to make up 40% or more of U.S. uses. Because of its size, blow molding can be expected to increase about at the overall rate for high-density polyethylene. Slower growth in bottles of all kinds will be off set by growth in larger containers such as drums and small tanks. Injection molding markets rank sec ond as a use of high-density polyethyl ene with about 25% of the total. This use still has some potential to take markets away from low-density poly ethylene. In addition, high-density poly ethylene faces relatively fast growth in crates as a replacement for wood and metal. The crate business depends heavily on the health of the returnable bottle business. This creates a trade-off with disposable milk jugs and other containers in use of high-density poly ethylene and other plastics. Use of the polymer in pipe, which along with film accounts for most of the extrusion uses of high-density polyeth ylene, continues to grow at an aboveaverage rate. Construction declines have slowed demand for pipe, but an eventual resurgence in residential and commercial construction probably will speed up demand for sewer, drainage, and other pipe uses. Film's big pros pect continues to be bags, mainly a capture market from paper. The weak est market for high-density polyethylene remains extrusion coatings of paper, used largely for milk cartons, which, at least in the gallon size, continue to shift to blow molded bottles. For all of 1981, high-density poly ethylene may do better than most other thermoplastics, but it still will not be like old times. Plant use is still too low, and discounting of prices is eating into profits, which remain low.
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Key Polymers
CH,—CH
Polypropylene • Demand at new high • Capacity down • Prices still weak PRODUCTION/CAPACITY Billions of lb 6 • Production Π Capacity8
ÉTÉ il ο 1979
1980
1981
a First quarter.
HOW MADE Polymerization of propylene catalyzed by metallic salts and alkyls
MAJOR FABRICATED FORMS (U.S.) Injection molding, much for transportation use, 40%; fibers 35%; film 10%
FOREIGN TRADE Exports—declining to about 600 million lb in 1981, imports—negligible
PRICES List prices 50 to 56 cents a lb for large volume; discounting widespread
COMMERCIAL VALUE $2 billion for total 1981 production
Of the major U.S. thermoplastics, poly propylene will provide the best record for the early 1980's. This is not to say that producers are elated over the polymer's performance. In fact, they repeatedly have been stunned by the failure of forecasts. The result is that companies are putting little money into additional plant capacity. "Good performance" to polypropyl ene producers means the exceptionally small decline in production of this ther moplastic in the 1980 recession, about 200 million lb for the year to 3.6 billion lb, according to statistics compiled by Ernst & Whinney for the committee on resin statistics of the Society of the Plastics Industry. Producers also look for full recovery and even new growth in 1981 to about 4.0 billion lb. Beyond 1981, producers foresee continued high growth (although down from historically high rates), higher production from the same units because of improved catalyst systems, and in creased plant operating rates. In 1981, the pickup in polypropylene production will be more than double the decline last year. Most industry sources expect 1981 production to exceed 4.0 billion lb, a new record, even with a slow start in the year. U.S. demand will rise even more, since producers expect exports to fall from nearly 700 million lb in 1980 to 600 million lb or a bit less in 1981. If polypropylene output hits 4.0 billion lb in 1981, existing plants will operate at about 7 9 % of nameplate capacity of 5.1 billion lb per year in the first quarter. This capacity is almost 300 million lb lower than it was a year earlier because of the loss of Amoco Chemicals' plant in New Castle, Del., in an October 1980 fire. The company decided not to rebuild the plant, saying that improvements in cat alyst systems and other process tech nology would allow them to meet pro jected demand from their remaining plant at Chocolate Bayou, Tex. The phase-in of new catalysts and other technology during the past two years makes estimates of polypropylene capacity less firm than for other ther moplastics. Industry analysts estimate that at least 200 million lb per year or more of capacity, perhaps 5 % , will be added in 1981 without a new reactor anywhere. Some analysts also estimate
CH, —Ι η that existing capacity at the beginning of 1981 was larger than 5.1 billion lb be cause of such debottlenecking efforts last year. What's really needed to straighten out the capacity data question, one analyst says, is a big polypropylene demand increase somewhere. This would cause producers to run plants all out for several months and would do a lot to confirm capacity estimates. It also would do a lot for profitability, something that bulk-use grades of polypropylene have never been noted for. As it is, running plants all out might take some time. True, polypropylene continues to gain markets through cap ture from other polymers, especially from polystyrene and other styrenics. This capture growth, however, is un even, with nearly complete takeover in a few consumer products and slow in roads in others. Over the entire polypropylene market, the big uses continue to show the major volume growth. Injection-molded items, with about 4 0 % of the total market, probably will keep their position for a few years, but they are being threatened for top spot by fibers, which currently have about 3 5 % . The polypropylene fiber business still holds vast potential, according to some industry observers. Although polypro pylene has almost completely captured carpet backing and indoor/outdoor carpet uses from other fibers, mostly natural fibers, other "severe service" applications may be just beginning. For example, the potential for polypropylene in road bed and soil stabilization looms large. Small amounts of polypropylene are used in various extrusion products. Drinking straws—not the largest extru sion use, but the best known—have been dominated by polypropylene for some years, but account for only about 25 million lb of resin per year. Other, larger uses are wire and cable coverings and thermoformed containers. For this year and early next, poly propylene appears to ride on its usual attributes—great potential, fairly good sales relative to production capacity and to other polymers, and low profitability for basic grades. The most likely change will be gradually higher use of plant ca pacity.
Aug. 31, 1981 C&EN 21
C H , — CH·
Key Polymers
Polystyrene • Demand weak • Capacity up • Prices discounted PRODUCTION/CAPACITY Billions of lb
6
• Pre•due tion SI Car>aci1ya N».
υ
*
1 J .11 Ϊ L I
4
1979
1980
ft. •\
1981
a First quarter.
W
HOW MADE Polymerization of styrene using a peroxide initiator
MAJOR FABRICATED FORMS (U.S.) Injection molding 50 % ; extrusions 35 % ; beads 10 % ; one third of end markets in packaging
FOREIGN TRADE Exports—falling to about 150 million lb in 1981, imports—negligible
PRICES List prices 50 to 52 cents a lb for large volume; discounting widespread
COMMERCIAL VALUE $1.8 billion for total 1981 production
22
C&EN Aug. 31, 1981
-J η
Last, and in many gloomy ways least, profit margins have declined to levels at among major U.S. thermoplastics is which capital investments must be re polystyrene. Producers ran into a big considered. Industry sources other than decline in demand in 1980 and are Dow confirm low profit margins for finding the 1981 recovery less than polystyrene. Some producers are be hoped for and less than the recovery in lieved to be earning nothing, just re other thermoplastics. covering raw material and operating In 1981, production of polystyrene costs. probably will reach 3.8 billion lb, less The basic problem for polystyrene is than 10% above 1980 production. This that most uses of any size have leveled means that 1981 production still will be off. Demand for major end uses such as 5% below 1979 production of 4.0 billion packaging, consumer products, and lb. electrical components is about the same this year as in 1980. Exports are falling Some of this product's analysts have as the rise in hydrocarbon costs catches an even worse forecast. They view 1981 up with polystyrene, raising its average up just 5% from 1980's low. They be selling price in foreign markets close to lieve that the production upswing in late world levels. spring didn't last and that output this About the only bright spot in polysty summer will show little or no improve rene markets is expandable beads. ment over 1980, when output was down Polystyrene beads are finding wider use a third from the first quarter. If 1981 production is 3.7 billion lb, or as an insulation material. Energy con servation efforts likely will help, espe 100 million lb below the optimistic view, cially if construction picks up and efforts in-place plant capacity will operate at a punishing 65% of the nameplate total of succeed to increase use of beads in recreational vehicles. 5.7 billion lb per year in the first quarter. Competition from other plastics, This plant operating rate, the worst namely polyolefins and particularly among major thermoplastics, would be polypropylene, has slowed growth in well down from 7 7 % in 1979, the last "good" year. Even at 3.8 billion lb for polystyrene and dampened prospects for future growth. Polypropylene in end 1981, the consensus figure, production products gains two ways. It costs less would give an operating rate of only because of its density advantage, and it 67%. Because some polystyrene plants are can be "filled" acceptably with cheaper inert materials, thereby lowering product shut down partly or totally, the operating cost. Such competition will hold down rates for the other plants are a bit higher. polystyrene growth in many end uses Estimates are that between 300 million that were once entirely polystyrene's and 500 million lb per year of capacity province, to about the level of growth in is down. None of this apparently has constant-dollar gross national product. been written off as yet, but restarting As an old, well-established thermo might be questionable in light of current plastic, polystyrene's technical char and future economics. For now, this acteristics, close cost tie to raw material capacity is included in the industry's benzene prices, and its current uses are total, biasing the overall operating rate widely known. Although this information down. can help polystyrene in some ways, it This year, only minor additions are due for polystyrene capacity. If any of also hinders the resin as producers of other resins work to substitute theirs for the shut-down plants actually are polystyrene by touting slightly improved scrapped, overall capacity will get a net final products costing a bit less. This decline. substitution naturally is offset in part by Longer term, capacity additions look continued product development in tiny on balance. A few small expansions polystyrene. for making expandable polystyrene will be available in 1982 and 1983. One In any event, the balance seems to large expansion, 100 million lb per year put the immediate outlook for polysty for 1983 by Dow Chemical, officially has rene at 5 to 7 % production growth an been shelved. nually. Later in the 1980's, this rate is As Dow pointed out in announcing the expected to slow substantially, stop, or indefinite delay in its expansion plan, go into reverse.
