Imports, weak demand pressure N American EPS

04 November 2008 22:35  [Source: ICIS news]

HOUSTON (ICIS news)--Expandable polystyrene (EPS) prices in North American markets will likely fall in November due to pressure from weak demand and strong competition from cheaper Asian imports, market sources said on Tuesday.

The drop could be about 8 cents/lb ($176/tonne, €139/tonne), sources said.

A growing disconnect between styrene monomer (SM) prices in Asia with those in the US has created a large gap in EPS prices and a wide-open arbitrage from Asian to North American markets, despite import tariffs.

EPS prices in Asia were hovering around 45 cents/lb as of last Friday, suggesting that beads of Asian origin could land in the US at about 66-67 cents/lb in 45-60 days. By contrast, US prices are in the high 90s cent/lb, according to global chemical market intelligence service ICIS pricing.

US producers do not stand a chance to match those prices due to the difference in raw material prices. While SM sells in Asia at $565/tonne, its price in the US Gulf is notionally at $1,100/tonne in an illiquid market.

A domestic producer conceded that the result may be a market share loss for North American suppliers in the upcoming months.

Producers hope that the low cost of styrene in Asia will be temporary and that US prices will correct themselves as SM prices react to cheaper November benzene prices, which settled earlier this week at $1.60/gal for a 62% drop relative to October.

Similar conditions were developing in Mexico, where imports were getting more attractive due to a large price differential with domestic beads, transformers in Mexico said.

Major North American producers of EPS include NOVA Chemicals, BASF, Flint Hills Resources and StyroChem.

($1 = €0.79)

For more on BASF or NOVA Chemicals, visit ICIS company intelligence
For more on EPS, benzene or styrene visit ICIS chemical intelligence
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By: George Martin
+1 713 525 2653

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