OUTLOOK '10: Asian styrenics off to a slow start in 2010

By Clive Ong

SINGAPORE (ICIS news)--Asian demand for styrenic resins, especially expandable polystyrene (EPS), is expected to be weak in the first quarter of next year amid a seasonal lull, market players said on Monday.

Demand for polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS), while better than EPS, is also expected to wane in January, they said.

Market participants said that buying momentum had weakened considerably in December as most factories in China had completed their business for the year while other producers had sufficient inventories to tide them over till next year.

Traders had also kept lean inventories in the face of weak buying momentum and most had liquidated their stocks in November to maintain low inventory levels during December and January.

The poor demand in the styrenics sector was in stark contrast to a bullish uptrend in feedstock styrene monomer (SM). Spot values of SM increased 25% since October.

Trading increased further in November and December. However, the trading fervour did not spill over into the styrenics sector.

"It is difficult to match the big price uptrend in SM, especially when it is the slow season for plastics", a trader in Hong Kong said.

Resin suppliers are also worried about their inability to raise prices in line with rising SM costs.

"The spread between EPS and SM had dropped to $100/tonne (€70/tonne) or less, compared to the $180/tonne a supplier typically targets," a producer in Taiwan said:

The spread between general purpose PS and SM also declined below $80/tonne compared to the usual $100/tonne.

A PS producer in NE Asia said: "We have to increase prices each week, but demand will fall further whenever prices go up during the lull season."

Spot ABS prices were $300/tonne above SM costs in the second half of December. However, producers said the spread was insufficient to cover costs, mainly due to the rising values of other feedstock like acrylonitrile (ACN) and butadiene (BD) at above $1,800/tonne CFR NE Asia and $1,700/tonne CFR NE Asia respectively.

An ABS producer said: "With feedstock values all at elevated levels, we need more than $300/tonne spread to cover our production costs."

Resin producers are expecting demand to be spurred by a recovery in the global economy in the first half of next year but most producers said that any rebound would likely occur after the Lunar New Year holidays next year.