Europe PS buyers face higher prices for May as BD soars

28 April 2011 12:08  [Source: ICIS news]

LONDON (ICIS)--European polystyrene (PS) buyers face more price increases in May following a brief respite this month, when prices have fallen by as much as €90/tonne ($132/tonne), as the price of butadiene (BD) has soared, sources said on Thursday.

The monthly styrene contract price is widely expected to increase, rising by €20–40/tonne, which will add to PS producers’ production costs.

The main cause of concern for PS producers is the price of BD, which is used in the manufacture of high impact polystyrene (HIPS). Polybutadiene, which will incur the same increase in costs as BD, constitutes around 9% of HIPS production costs.

The May BD contract settled on 27 April at at €2,050/tonne FD (free delivered) NWE (northwest Europe), an increase of €360/tonne, or 21%, from the previous month.

“That [BD] increase will mean an increase in our production costs of €25–30/tonne. We should be seeing a delta between the two [PS] grades of €130–140/tonne,” said one major producer.

There had been attempts during April to increase the delta between general purpose polystyrene (GPPS) and HIPS, but the outcome was patchy, as some producers pushed more than others and some buyers were tough in negotiating prices.

The delta between the two grades has been growing slowly for several months, from an average of €75/tonne in October 2010 to around €90/tonne at most accounts in April.

There are still exceptions below €80/tonne, but these are becoming harder to negotiate. The latest increase in the BD contract price is expected to give a fillip to producers to recover extra costs.

The supply-demand balance in the European PS market means that many buyers have little choice but to accept price hikes proposed by producers.

A series of permanent capacity closures in Europe in 2009 left the market tight. In 2011, the balance is still fine; product availability is not short, as was the case in 2010.

PS producers’ margins have improved greatly since the closures of 2009, but PS demand has suffered from technological advances and substitution in the packaging sectors.

GPPS prices are currently trading around €1,480–1,500/tonne FD NWE on a net basis.

GPPS is used extensively in the packaging industry. HIPS, which has better resistance to shock than GPPS, is used in the manufacture of household goods and toys.

($1 = €0.68)

For more on polystyrene visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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