BASF and Dow Contend for Buyers of Styrene Operations03 Dec 2010 • by Natalie Aster
BASF and Dow are contending for buyers of their styrene units, which have combined sales of $10bn.
The companies are following in the footsteps of their competitors who exited from the styrene market as oil and gas-rich countries invest funds into production and processing of less commoditised products that are closer to the consumer.
A BASF official said the company is in negotiations to create a styrene joint venture from its unit that will provide $4.5bn (€3bn) in sales as a prelude to leaving the market.
Dow is also receiving bids for its unit, which it is planning to sell.
The companies are exiting from a sector that is controlled by Kuwait and UAE, where lower costs of feedstock and the expanding Chinese market are nearer to hand.
One of the other factors for exiting the market is low demand for styrene and polystyrene.
Styrene demand is expected to decrease substantially as ethylene-based plastics, which are more recyclable, are favoured among western consumers.
Polystyrene demand is declining as makers of yoghurt containers, disposable cups and egg cartons shift to polyethylene terephthalate, polypropylene, cardboard and paper.
BASF styrenics vice-president Jaroslaw Michniuk said the company has witnessed a considerable decline in polystyrene profitability with the emergence of the flatscreen television that utilises less material and the disappearance of audio and video tapes.
Michniuk said profit margins are decreasing to less than 1%, which is half the level of 2007.
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