BASF Is Latest PS Producer to Reduce Output

07 May 2001 00:00  [Source: ICB Americas]

BASF has become the latest polystyrene (PS) producer to cut its output in Europe after a decline in prices caused by weak demand. The company is reducing production for several weeks by around 20 percent in order to carry out "plant optimization work."

It has three PS plants in Europe--a 360,000-ton-per-year unit at Ludwigshafen, a 230,000-ton-per-year facility at Antwerp and a 50,000-ton-per-year plant at Tarragona, Spain.

Atofina has reduced output at its PS plants at Gonfreville, France, El Prat, Spain and Stalybridge, England by an average 30 percent because of poor margins caused by higher production costs and low selling prices.

While prices of other polymers have been rising recently, those for PS have been flat or continued to decline. Prices for both general purpose and high impact PS are 15 to 20 percent lower than they were six months ago, although they are around the same level as in the spring of 2000.

BASF has warned there could be shortages during its production cutbacks but says it can keep customers supplied from its own stocks.

"We feel that prices have now reached the bottom and will stabilize over the next few months," says a BASF spokesperson. "In the second half of the year they should start to rise again."

Atofina is also expecting a recovery in prices within the next two months. "We will continue with the reduction in output until the end of May," says an Atofina official. "A return to normal production will then depend on the outlook for prices. But we hope to be able to announce a price increase at the end of the second quarter."

However, analysts say that since worldwide PS demand is relatively weak, European prices are unlikely to increase for several months.

"The producers are being optimistic about prospects for price increases," says John Bonarius, a consultant at CMAI Europe, London. "There is a lot of overproduction, so converters have been destocking since last September, knowing that every time they want to buy they will get lower prices."

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