Aug styrene numbers test Europe PS margins

01 August 2008 11:36  [Source: ICIS news]

LONDON (ICIS news)--European polystyrene (PS) players have focused on margins in their reactions to the first and second August styrene contract settlements of €1,260 tonne ($1,969/tonne) and €1,286/tonne, players said on Friday.

“This is way too high, we can’t make any money like this, and our customers can’t either,” said one major PS producer on hearing the first styrene contract, up €80/tonne from the contract partners’ July settlement.

However, another PS producer said: “This is just where we would have expected it to be.”

PS margins were widely acknowledged to be poor, but some players felt that such an increase would not help drive up demand, which was seen as weak and expected to get weaker if producers continued to add pressure to the current record high price levels.

Net general purpose PS (GPPS) prices were trading at €1,300/tonne ($2,031/tonne) FD NWE at the end of July.

A second settlement on Friday at €1,286/tonne FD NWE, up €50/tonne from the same contract partners’ July contract, was nearer most producers’ expectations.

PS production was already reduced in Europe as producers sought to accommodate poor demand, and one major producer confirmed that it would be trimming its assets further on receiving news of the first styrene contract settlement.

PS buyers were faced with increases of €75-130/tonne in August, but several were considering substitutes for PS.

“If they want to kill PS, then this is the way,” said one PS buyer. “We are considering switching to PET (polyethylene terephthalate) and once that change is done, we won’t be switching back.”

Discussions for August PS were, expected to be protracted, as has become the norm in recent months.

PS producers in Europe include BASF, Total Petrochemicals, Dow Chemical, Polimeri Europa and INEOS NOVA.

($1 = €0.64)

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By: Linda Naylor
+44 20 8652 3214

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