Europe styrene buyer calls for contract changes

15 November 2007 10:42  [Source: ICIS news]

By Barbara Ortner

 

ANTWERP (ICIS news)--European styrene producers should develop better price setting mechanisms to achieve market transparency, a major consumer said on Thursday.

 

“Raw material costs are critical for business viability and we need good market transparency and price setting mechanisms,” said Philip Bruce, group managing director for major UPR (unsaturated polyester resin) producer Scott Bader.

 

The current price setting mechanism for the European styrene FD (free delivered) barge contract was unsatisfactory because it involved only three consumers, none of which was in the UPR sector.

 

Dissatisfaction with the FD barge contract system had given rise to an increasing number of private agreements, and the level of discounts was growing, he said at the 6th European Aromatics and Derivatives Conference.

 

A better system was the current monthly FCA (free carrier) contract process, which gave more consumers the opportunity for involvement in the final contract price and embraced a variety of user sectors including UPR.

 

Feedstock volatility was the major challenge to the profitability of the UPR business, so quarterly contract pricing would be preferable to the current monthly system.

 

“Upstream (styrene) monthly price movements are a real problem to pass through the chain (when) customers have fixed price contracts from three to 12 months,” he added.

 

The supply of key raw materials had been particularly problematic in 2006, when there had been force majeure on phthalic anhydride, isophthalic acid, maleic anhydride, glycols and DCPD (dicyclopentadiene).

 

Of these, supply problems on phthalic and glycols had continued into 2007, he said.

 

“Raw material supply robustness is critical to success and Europe needs some new upstream investment.”

 

Supply problems were exacerbated by the shortage of ADR qualified hauliers in Europe, he added.

 

The 6th European Aromatics & Derivatives Conference, organised by ICIS and International eChem, runs on 14-15 November 2007 in Antwerp, Belgium.

By: Barbara Ortner
+44 20 8652 3214

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