We have been asked a couple of times in the last week how US polymer (polyethylene in particular) pricing can remain so robust in a market where there is an inventory build going on. The PMI numbers are part of the answer. While we may be in the seasonally weaker part of the year, customers are still looking for more material than a year ago, and this makes the “we need a lower price” argument much harder, especially when the memory of 1H 2021 acute shortages is still fresh in the memory and when, more than likely, they are getting signals from their customers of a further step up in demand in 2022. We have done some traveling recently and the incremental demand for packaging polymers is very evident in the travel and leisure business, even if the number of travelers is still down. There is more packaging on airline and airport food and hotels are offering pre-packaged food for breakfast that would previously have not been individually packed. The reasons are obvious – safety and hygiene from the consumers' end and costs from the providers' end, as prepackaged food, can be bought in bulk and more cost-effectively and they likely have a longer shelf life.
We think the India styrene plan is ill-advised. The styrene market has had a brief moment in the sun over the last couple of years, but we believe that it has another leg down ahead, based on the recycling complications of polystyrene versus other packaging polymers. New capacity in China and likely weaker demand in the US and Europe should push the global market into oversupply for a prolonged period (if not permanently). This is bad news for styrene (or polystyrene) producers but very good news for the non-integrated producers of styrene derivatives targeting the durables markets – such as Kraton.