Europe EPS producers lament feedstock volatility

26 February 2010 19:21  [Source: ICIS news]

LONDON (ICIS news)--Some European producers of expandable polystyrene (EPS) are frustrated by the fluctuations in raw material values that they feel makes it more difficult for them to price their own product in downstream markets, sources said on Friday.

“It is becoming increasingly difficult to contend with cost volatility,” said a producer.

Besides packaging, EPS is mainly used in the construction industry as an insulation material. In both sectors, converters and their customers operate in an environment in which it is almost impossible to vary prices significantly from one month to the next.

One EPS producer commented that it usually made contracts with its customers at the beginning of each year but had to advise them of price changes at more frequent intervals. Although it had already sustained a €172/tonne ($232/tonne) hike in styrene monomer costs under the January barge contract, it had to notify some customers of an EPS price rise effective from 1 April.

During the last six months, the monthly styrene barge contract price had varied between a fall of €84/tonne and an increase of €172/tonne. During the same period, monthly EPS values in Europe tended to move less violently but still moved within a range of minus €40/tonne to plus €150/tonne.

Both the selling and buying sides of the EPS market remarked that what consumers needed and wanted was relative price stability.

For EPS producers, feedstock price volatility has exacerbated a background of thin or negative margins that had dogged the industry throughout the past year to 18 months. Each month suppliers struggled to improve spreads between raw material costs and selling prices, while endeavouring not to lose volumes, they said. Large increases, in particular, aggravated these efforts.

One producer voiced his vexation at this situation, saying: “This industry is stupid. If we go on like this, some people will have to shut down.”

($1 = €0.74)

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By: Peter Gerrard
+44 208 652 3214

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