The Expanded Polystyrene (EPS) market in China is experiencing mixed sentiments currently despite the decline in prices during this week. Since the third week of March, EPS prices have become bearish after a 2% growth during the second week. Studies by ChemAnalyst show that prices are decreasing due to increased supplies and moderate demand from downstream companies.

From the second week of March to till date, EPS producers have been carefully managing their inventory levels. While some suppliers are maintaining their prices, hoping for an improvement in market conditions, others have reduced their quotes to clear excess stocks. These differing approaches among them are causing uncertainty in the domestic market. Overall, EPS supply remains more with productions running continuously and demand from downstream sectors being average. This imbalance is putting downward pressure on prices.

Demand for EPS from downstream construction and packaging sectors remains continuous yet moderate. From the third week of March, the recovery in the construction sector is supporting EPS usage. It is particularly placing orders for the flame-retardant grades used in insulation materials. However, the speed of recovery is not satisfactory, as most buyers are still confused about making their purchases because of doubts regarding the future outlook.

Meanwhile, the packaging industry is getting revived from the decrease in activity, which happened during the post-Lunar New Year period. Though it has not taken place on a full-scale yet, stable demand for packing foods and e-commerce is helping to prevent any significant reductions in EPS usage. Overall, EPS intake in downstream companies is improving, but the recovery is uneven.

Apart from these, feedstock styrene costs are continuing the decreasing trend from mid-March till now. Prices have been dropping by around 2.4% each week. This has led to a major reduction in EPS production costs. In addition, lower natural gas prices are further supporting the production activities for manufacturers. Despite these factors, average demand is stopping producers from increasing their output levels to avoid building up their inventories further.

Export demand for EPS is also unsatisfactory, particularly from the Southeast Asian markets. This is offering very little support to balance the moderation in domestic demand. So, traders and manufacturers are mainly focused on balancing supply and managing stock levels.

For now, the EPS market appears to be skeptical because of oversupply, reducing styrene costs, and average demand. However, this scenario might change in case if there is growth in demand, production costs, and plant closures. Market players may place their bulk orders for EPS carefully after reviewing the current market scenario.