Europe PS closures ‘will lead to better producer margins’

09 December 2009 16:57  [Source: ICIS news]

LONDON (ICIS news)--Permanent plant closures in the European polystyrene (PS) industry are expected to lead to higher asset utilisation rates in 2010 and an increased spread between styrene and PS prices, several sources said on Wednesday.

“Buyers are already noticing shortages in some grades, and when all the production is out by January, availability will remain tight,” said a major PS producer.

European PS margins had been poor for many months and the PS market was witnessing a structural change, leading to two major producers putting their PS businesses up for sale, and the closure of several plants, as producers sought to balance the market.

By the end of December, the European PS industry will have seen plant closures amounting to close to 350,000 tonnes/year.

INEOS NOVA will close its 90,000 tonne/year PS plant at Breda, the Netherlands, at the end of the year, while weak margins led Dow Chemical to close its 65,000 tonne/year PS plant at Bilbao, Spain, in the third quarter along with its 50,000 tonne/year plant at Terneuzen, the Netherlands.

BASF had already closed 25% of its PS capacity at Ludwigshafen, Germany - estimated to be around 80,000 tonnes/year - and Total Petrochemicals had closed a 60,000 tonne/year PS line at Gonfreville in France at the end of November.

The combined closures amounted to an estimated 10% of PS capacity in Europe, said a major producer.

“PS producers are not closing units for pleasure,” said another major European PS producer. “The loss involved simply cannot continue.”

“These are extreme measures,” he continued. “People lose their jobs but we couldn’t continue with these losses.”

PS volumes had been dropping consistently over the past couple of years, with technological changes in particular hitting the PS market hard.

“Video and audio cassettes have just disappeared, and 80% of the CD box sector has gone. Flat-screen technology has led to the loss of 75% of PS used in the TV sector,” said the producer.

Growth in packaging, refrigeration and expanded PS (EPS) in the building sector would help sales, said sources, but these volumes would compensate only partially for the loss in the electronics area.

Some new products were being developed for PS use in the bottle sector, and EPS (expandable PS) from PS, but PS volumes were still on the wane.

Volumes in the food packaging area remained strong for PS, and this was expected to continue.

“PS processability is second to none in some applications in the dairy industry, and foams for insulation are good. We have seen most substitution to polypropylene (PP) from PS, but there is still some threat from PET (polyethylene terephthalate),” said another producer.

“We are more optimistic at the end of the year than at the beginning,” he continued. “Volumes in Europe for the first six months of the year showed a 10% drop compared to 2008, but we are now down to minus 5% and hope that may improve by the end of the year.”

“Asset utilisation rates will be like those in 2007 next year,” said yet another producer source, referring to production rates and improved margins caused by a cut of 13% of installed PS capacity in Europe in 2006.

Producer sources agreed that more needed to be done in the recycling field for PS.

“We don’t do a great job promoting the possibilities of PS recycling,” said the producer, “and we have to change that”.

Buyers were sanguine ahead of the plant closures and admitted that 2010 could prove to be difficult in the PS market.

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

($1 = €0.68)

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By: Linda Naylor
+44 20 8652 3214

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