While the pandemic caused an increase in demand for packaging, it was not enough to offset the heavy losses in other market segments and prevent an overall decrease in trade voluems.
European polystyrene (PS) trade to April 2020 has decreased overall compared to last year, according to recent Eurostat data. However, PS demand has not suffered as much as other polymers despite the lockdowns, mainly because of the little exposure to the auto industry and a strong performance of the packaging sector.
However, some important market segments suffered and dragged down total demand. For instance, construction, like many other markets was brought to a standstill. While it is now recovering, volumes are understood to be below last year.
Strong packaging demand
On the other hand, demand for packaging remained strong throughout. In fact, there was a surge during the lockdown period as people stayed at home and relied on deliveries. In addition, with fewer trips to restaurants, demand for certain foods from supermarkets increased and further supported PS demand. But in the past few weeks, as economies are opening up again, the recent surge in demand for packaging has run out of steam.
Despite some of the gains, the overall impact of the pandemic on total PS demand was negative, which is also reflected in the latest trade data. The data shows that PS imports to April 2020 were the lowest in the past three years. And exports were lower than last year but higher than 2018.
Single use demand
An alternative explanation is that the lower trade data represents the ongoing reduction in single use plastics. The legislation to ban single use products made of PS will come into effect in July 2021. As such, volumes for this application have been decreasing for a while.
But while this may have played a part in reducing trade in 2020, its impact was likely minimal. This is because demand for single use products has been decreasing for a while and not just in 2020.
Moreover, the upcoming ban most probably had no impact at all on demand in 2020. This is because the pandemic seems to have reignited interest in single use applications, as it helps reduce the spread of the virus. Some sellers said demand for single use applications in July was up 20-30% compared to 2019.
Therefore, it is plausible to expect that the PS trade pattern seen in April will probably remain the same for the next few months. Volumes will remain lower than last year but should remain strong enough to help producers maintain margins.