21 October 1996 00:00 [Source: ICB]
A mixed reception greeted the announcement of the Q4 styrene price. Some players viewed it as a fair compromise, while others had expected a roll-over.
European Q4 styrene contracts have been agreed at DM865/tonne for barge deliveries and DM910/tonne for truck, an increase of DM20/tonne over Q3. The settlement, which is way above current spot levels of $490-500/tonne cif, has received a mixed reception. Some players see it is a reasonable compromise in view of increased raw material costs and higher oil prices.
However, with the styrene market suffering from overcapacity and low spot prices, the DM20/tonne rise has been met with surprise by some players who were expecting a roll-over.
One producer expressed disappointment at the level, which he said came only halfway to meeting the additional raw material costs. Styrene producers have lost money during Q3 and their cash cost position will be worse in Q4, he said. He and others expressed the view that future anticipation is being reflected in current prices with market sentiment being out of line with actual market conditions.
'The spot market does not reflect the true situation and is a result of industry psychology,' commented a producer. 'Everyone is worried about surplus product and it will be a big issue next year. The US and Far East are also suffering from low prices and Europe may suffer by default,' said a player.
However, some are more upbeat about future prospects. One producer, commenting that the market has been much more positive than reported, said: 'Styrene is growing in line with GDP and I do not see any reason to be pessimistic.' Demand from derivatives is strong, say players, with excellent volumes from polystyrene.
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