16 May 2011 00:00 [Source: ICB]
Prices fall on lower feedstock costs, while Total Petrochemicals builds next generation capacity
Expandable polystyrene (EPS) prices in Europe have fallen by an average of €30/tonne to €1,470-1,550/tonne ($2,130-2,246/tonne) free delivered (FD) in April, on the back of lower feedstock styrene monomer (SM) prices.
The reduction nearly mirrors the price increase seen in March, as assessed by ICIS. The modest decline is seen as a reversal to the trend of rising prices in prior months, which had been connected to rising SM costs.
A decline in April contract prices was predicted by EPS players once a substantial reduction in SM numbers was seen in the first few days of April.
Producers resolved to limit the reduction to restore severely depleted margins.
Compared with the €80-95/tonne fall in styrene, they managed to secure an increase in the spread of about €50-60/tonne, as assessed by ICIS.
EPS margins are contingent on the fate of the construction segment, which would need to show a sustained surge in growth in order to impact EPS, according to Hungary-based Erste Bank.
The bank forecasts the EPS product/feedstock margin for Polish subsidiary Synthos Dwory would amount to €546/tonne in 2011, compared to €504/tonne in 2010.
Meanwhile, for the Czech Republic-based Synthos Kralupy subsidiary, the product/feedstock margin is expected to edge up to €557/tonne in 2011, from €540/tonne in 2010.
In contrast to the decline in the EPS market in Europe, the overall PS market has improved significantly.
This has been attributed to recent shortages in supply as inventories were liquidated.
As a result, product/feedstock margins in the European PS market are robust, according to Erste Bank.
The bank estimates the PS product/feedstock margin for Synthos Dwory will be €775/tonne for 2011, compared to €483/tonne in 2010, while the PS product/feedstock margin for Synthos Kralupy will be €787/tonne in 2011, versus €520/tonne in 2010.
France-based Total Petrochemicals announced in late April that it will begin manufacturing a new generation of EPS at its site in Feluy, Belgium, by 2013, for use in the insulation market.
The company's research teams have been developing new technologies that give the new line of EPS a technical and insulating advantage over conventional white EPS.
Conventional EPS is a versatile durable material that already offers excellent insulation properties. EPS foam is 98% air captured, within a 2% closed cellular polystyrene structure. It is a non-toxic, moisture-resistant and rot-proof material. It combines light weight, high compressive strength, rigidity and safe handling characteristics.
The combination of all these properties makes EPS a well established material for the construction industry - and offers a proven economic solution for the building industry, according to Total Petrochemicals.
"The new EPS generation combines all the properties listed above, but exhibits significant improved thermal insulation characteristics," said a company official.
After its acquisition of two PS lines in August 2010, with a combined capacity of 160,000 tonnes/year at its Feluy, Belgium site, Total Petrochemicals decided to modify one of the two lines to manufacture the new EPS.
The investment in this modification and the subsequent launch of the new EPS range is expected to ensure the long-term continuation of styrenics production at the Feluy site.
Meanwhile, the second PS line will be used to manufacture high impact and general purpose PS grades. The company assures that supply to customers will not be interrupted. Four other Total Petrochemicals sites in Europe also produce PS.
"The modification foreseen at Feluy will offer the opportunity to produce the new generation of expandable polystyrene - with structures, additives and shape optimized for high quality insulation - can be easily and competitively transformed on existing board production equipment," said the official.
The styrene monomer consumed at the Feluy site is mostly delivered by barges and can be supplied from various origins, according to the official.
EPS PRICES RISE IN MEXICO
In Mexico one of the country's main EPS producers, Polioles, is seeking a price increase to offset rising feedstock costs.
The company has nominated a 4 cents/lb ($88/tonne, €59/tonne) hike, effective June 1, or as contracts allow. At least one buyer has suggested that some of the increase will be accepted, but it is possible large customers may not be subject to the entire amount of the raise.
However, another market participant said the increase would be accepted across the board, unless the price of feedstock SM decreases significantly.
Meanwhile, it is expected that another major Mexican EPS producer, Idesa, will follow Polioles' price increase initiative with one of its own by mid-May, though this was not confirmed.
Mexico EPS spot prices were at 104-106 cents/lb delivered (DEL) for block and package material, as assessed by ICIS on May 3. This level has been maintained for the previous four weeks.
The proposed increases follow a month of relatively weak demand-caused by a depressed construction sector - although it was reported that the EPS market in Mexico has been faring slightly better than the US market, based in part on strong demand from the packaging sector.
In addition, Germany-based producer BASF also announced its own 4 cent/lb price increase initiative, effective June 1, or as contracts allow. BASF's nomination is said to be based on feedstock costs.
TIGHT MARGINS IN ASIA
On the feedstock side, in Asia styrene margins have been struggling to break even, despite soaring prices and an upturn in demand from the EPS sector in China.
With margins dismal, according to producers and traders, producers will need styrene to be priced at above $1,500/tonne cost & freight (CFR) China in order to break even, one Japanese manufacturer said. As a result, some Asian producers have had to cut back their operating rates.
Styrene pricing in northern China is expected to continue climbing in May, owing to limited availability and the upturn in the EPS market.
EPS-based foam makers are understood to be building inventories, now that briefly imposed restrictions have been lifted by the Chinese Ministry of Public Security, which had called for better fire-proofed construction materials and effectively banned its use after a disastrous fire at a Shanghai residential tower in November 2010. EPS producers lobbied against the ruling and the authorities eased the restrictions.
As a result, EPS resins can once again be used in certain regions in eastern and northern China, accounting for the upturn in demand.
Additional reporting by Franco Capaldo, Peter Gerrard and Andy Brice in London, and Michelle Klump in Houston
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