Europe PS sellers target hikes following new styrene contracts

03 August 2010 11:36  [Source: ICIS news]

LONDON (ICIS)--BASF will target a €20/tonne ($26/tonne) increase on August polystyrene (PS) after confirmation of the third and final public styrene monomer contract for the month, a company source said on Tuesday.

“The average of the three [styrene] contracts comes out at plus €4.3/tonne according to my calculation, so we will be going for plus €20/tonne on PS,” said the source.

August was the first time in many months that more than one styrene monomer contract was made public, and Tuesday’s settlement at €962/tonne FD (free delivered) NWE (northwest Europe), the third confirmed for August, represented a decrease of €11/tonne from the contract done between the same partners in July.

The first public barge styrene contract for August was confirmed at €995/tonne FD NWE last week, with the second done at €975/tonne FD NWE earlier this week.

Both showed increases on the sole public contract of July, but both were confirmed as a rollover from July when compared with the contracts done by the same partners.

Styron (formerly Dow) had made it clear that it would be targeting a €40/tonne increase on high impact PS (HIPS) for August and a €30/tonne increase for general purpose PS (GPPS) before any styrene contract had been settled. Other producers were waiting for the outcome of the monomer discussions before making plans for August PS pricing.

Buying sources did not agree with all three public contracts being included in the calculation of producers’ styrene costs in August, as styrene was the main driver for PS pricing.

The two other contracts, confirmed publicly, were both reported at rollover levels from July, but were higher than the July public styrene contract of €973/tonne FD NWE.

“I can see why they would want to argue an average...but surely the proper thing to do is compare the [same] settlement July to the August settlement,” said one large buyer.

PS buyers agreed that it would be difficult to argue a price reduction for August, however, as the supply/demand balance was tight due to production problems and the careful tailoring of production in line with demand, which had been a feature of the PS market for many months.

GPPS net prices were trading around the €1,250/tonne FD NWE level, and polypropylene (PP) - the main competitor of PS -  was still tight and expensive at €1,190-1,200/tonne FD NWE, a level too high to tempt PS buyers to substitute PP for PS.

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

($1 = €0.76)

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By: Linda Naylor
+44 20 8652 3214

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