EPCA ‘08: Europe styrene players expect tough Q4

29 September 2008 20:20  [Source: ICIS news]

MONTE CARLO (ICIS news)--Styrene industry players in Europe expect a tough fourth quarter and beyond as already poor derivative demand falls further against a backdrop of financial sector woes, they said on Monday.

“People are talking about recession in Ireland, but perhaps we are already talking about the ‘D’ word,” said a source with one major expandable polystyrene (EPS) producer on the sidelines of the European Petrochemical Association (EPCA) meeting Monday. 

Next year “is going to be extremely hard,” the source said.  “Styrenics had three to four reasonable years. That is over.”

This comment was more than matched by a number of key styrene’s players from styrene producers to polystyrene (PS) and EPS producers and commodity traders.

Key issues discussed included poor demand for PS - down 9% in 2008 - according to industry sources, fluctuating spot prices on energy complex and financial market turmoil, and a wider uncertainty over economic growth in Europe.

“Demand is still key,” said a source close to one major producer. “PS will stay flat on October. It is a very tough time.”

Some recovery was seen in demand after an “awful” October, the source said, but offtake was largely flat, with production levels, already low, still outstripping consumption.

Another issue, the source said, was “one word: unpredictability” in terms of the spot markets and wider economic scenario.  Spot styrene and upstream benzene values had been volatile with the market often illiquid for the past several months, making cost forecasting extremely difficult.

With the future of the world financial system seemingly hanging in the balance as two EU governments stepped in to rescue large banks, crude oil values still over $100/bbl and demand and prices on the downtrend the source said it was impossible to say where the market would be in a day or two let alone a year.

“It is very difficult to anticipate Q4,” he said.  “We don’t expect demand to be higher.  There is no argument for higher demand.”

“The industry is suffering very much,” said another consumer source. 

A key producer and buyer of styrene said that turmoil in other markets mean that there was little confidence in the industry. 

Traders said that this was evident in their lack of desire to do anything but the simplest of business and wariness over holding material in tanks for any period of times.

“The only deals people want to do are back-to-backs,” said one trader. “They want to buy and sell on the same day. I think there are some people out there with some very expensive material from earlier in the year, who are losing money just storing it.”

Another trader agreed, saying that recent illiquidity was a result of traders unwinding their positions so as not to be left exposed to unpredictable movements.

“The styrene market isn’t much fun, that’s about it,” said a trader, heading for the bar.

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By: Peter Salisbury
+44 20 8652 3214

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