30 May 2002 15:57 [Source: ICIS news]
LONDON (CNI)--Merchant styrene consumers will need help from their suppliers to manage the risk from increased price volatility if there is a move from quarterly to monthly pricing, said Olivier Churet, Rhodia's purchasing director, at the First European Aromatics and Derivatives Conference.*
He said here on Thursday that the future of the reference price is very important and could be a real threat to business. Exposure to peaks in prices that can last several quarters is long enough to lose customers, he noted.
A classical alternative is a 'cost plus' arrangement but Churet said this would kill the quarterly contract price as a reference and increase exposure to cost volatility. He floated the idea of an arrangement that would account for an improvement in performance.
Another way forward is the implementation of futures trading. However, Churet said his industry does not have the experience and knowledge for such a move and would need the support of suppliers. Traders could also play a role here with their experience of managing risk.
Selling into specialty chemicals markets means absorbing price hikes in both directions, he stated. There is a trend among specialty chemicals customers to agree prices for longer periods, such as 6 to 12 months.
He noted that some companies are being squeezed by suppliers asking for payment in 30 days. Since it could take some time before products reached the end-markets, the companies often have to finance the cost of the feedstock.
*The First European Aromatics and Derivatives Conference, organised by ICIS-LOR, European Chemical News (ECN) and International e-Chem, concludes today. CNI, ICIS-LOR and ECN are all part of Reed Business Information (RBI).
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