Expandable polystyrene producers in China have reduced operating rates at their plants and suffered a slump in sales after the Chinese government in mid-March announced it was reviewing a new standard which calls for construction material such as EPS to be of the highest fire retardant grade, market sources said this week.
The possible enforcement of the new standard has led to a sharp drop in demand for EPS in China, and subsequently a drop in demand for feedstock styrene monomer, sources said.
Asian SM prices have fallen 2.1% to $1,372/mt CFR China on March 28 since the announcement was made March 14. By comparison, feedstock naphtha prices have risen 2.4% to $986.25/mt CFR Japan over the same period.
On March 14, China's Fire Safety Department, under the Ministry of Public Security, published a notice saying a new set of safety rules and standards would be reviewed. It said that in recent years, several major fires in Nanjing, Harbin, Beijing, Shanghai and Shenyang have caused severe loss of life and property and it was critical that stricter controls be enforced. The Department and Public Health Bureau, also under the Ministry of Public Security, is now reviewing the new standards, which require among others, grade-A fire retardant qualities in construction material. The department will submit a recommendation to the ministry at the end of March and a final decision is expected in April. EPS is currently classified as having B-grade fire retardant qualities.
But according to industry participants, construction material that has grade-A fire retardant qualities will have other limitations such as effectiveness of insulation, and cannot be mass produced.
"If passed, the new ruling will make things very difficult for the construction industry," said a source from a major expandable polystyrene plant in China. "Everyone knows it cannot be done. A-grade product is not feasible, [B-grade] EPS is the best fire retardant material there is."
LOYAL GROUP'S EPS SALES FALL AFTER ANNOUNCEMENT
The world's largest EPS producer, Taiwan's Loyal Group, has saw a fall in domestic EPS sales in the last two weeks, which the company attributes to the announcement in March. The drop in sales has been under 10% so far, a company source said Monday. Loyal operates five EPS plants in China -- a 360,000 mt/year plant in Donguan, a 220,000 mt/year plant in Tianjin, a 300,000/mt year plant in Jiangyin, a 180,000 mt/year plant in Ningbo and a 100,000 mt/year plant in Xinjiang. Of the five plants, Loyal's Tianjin, Jiangyin, Ningbo and Dongguan facilities had undergone debottlenecking procedures at the end of last year, raising their total combined capacity by 30% from 1.16 million mt/year to 1.5 million mt/year, the source said.
Operating rates at the company's five plants were reduced on March 14 following the announcement, said the source, declining to reveal exact rates.
WUXI XINGDA ALSO CUTS OPERATING RATES
"The EPS industry is so worried, and now our operating rate is also reduced to 65%," a source with Chinese EPS producer Wuxi Xingda New Foam Plastics Material said Monday.
The company operates three EPS plants in China, one in Wuxi with a capacity to make 350,000 mt/year, another in Changzhou that can make 290,000 mt /year and one at Huizhou with a capacity to make 180,000 mt/year.
The combined operating rate at the three plants was previously 85-90%, but has been reduced to 65% in the two last weeks, the source said.
"Customers dare not to purchase EPS now. This could be an earthquake for the EPS industry, the source said.
