Europe August PS up €100/t but producers hit by weaker margins

31 August 2011 11:37  [Source: ICIS news]

PS producers hit by weaker margins despite August riseLONDON (ICIS)--August polystyrene (PS) prices have risen by €100/tonne ($145/tonne), following the €121-129/tonne increase in monthly styrene monomer barge contracts, but margins have been reduced in 2011, several producers said on Wednesday.

General purpose polystyrene (GPPS) is now trading at a net price of €1,350/tonne FD (free delivered) NWE (northwest Europe), up €100/tonne from the July level, and INEOS Styrenics has announced a €30/tonne increase for its September business.

September styrene contracts have not yet been settled and other producers are waiting for the outcome of negotiations before announcing September plans for PS pricing.

PS prices tend to follow the styrene contract curve closely, but the spread between the monomer and polymer has been reduced.

“In the past three to four months we have lost 50% of our margin on PS,” said a major producer. “In quarter one 2011, our gross margins were above €200/tonne, they are now barely above €100/tonne.”

INEOS Styrenics calculated its loss of margin to be similar in the same period.

The margin for high impact polystyrene (HIPS) has been hit harder than for GPPS due to the high cost of polybutadiene (PBD), used in the manufacture of HIPS. Sources said the percentage of PBD amounts to 8-10% in HIPS production.

Butadiene (BD) prices have soared in recent months, showing some relief only in the latest contract settlement for September, when it lost €125/tonne, landing at €2,400/tonne FD NWE. In January the BD contract stood at €1,340/tonne FD NWE.

PS buyers have not accepted increases lying down, but have been unable to find alternative sources for their product in August.

Several have complained bitterly of the volatility in the PS industry and plan to consider alternatives, such as polypropylene (PP) and polyethylene terephthalate (PET) when installing new capacity.

PS discussions in August were acrimonious and long and there is no sign to show that September will be any better.

PS is used in the manufacture of household goods, insulation and in the food packaging industry.

($1 = €0.69)

For more on polystyrene visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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