Styron to target increase for Nov PS with immediate effect

11 November 2011 12:59  [Source: ICIS news]

LONDON (ICIS)--European styrenics producer Styron is to announce a €50–100/tonne ($68–135/tonne) increase for its November polystyrene (PS) with immediate effect, with the precise amount of the targeted increase expected on Monday, a company source said on Friday.

“We are experiencing an exceptional situation, with styrene currently moving at $1,500/tonne and above,” said the source. “The amount of increase we are targeting is based on what one has to pay for styrene today. We need to get numbers up or face a huge margin loss.”

Earlier Styron had envisaged a €15/tonne drop for November PS pricing, but a spike in upstream styrene prices has made them consider the recent move.

Styrene monomer price ideas have risen as November has progressed but some sources expect the current trend to be short-lived.

While the second half of November has risen steeply, price ideas for December remain backwardated by around $150/tonne. Bids for December were heard at $1,335/tonne on Thursday morning, but were not met with any offers.

November barge contracts settled at €1,061–1,108/tonne free delivered (FD) northwest Europe (NWE). Contracts are subject to significant discounts.

PS pricing is settled notoriously late in the month, so buyers have time to absorb the news from Styron, and compare their pricing ideas with those of their competitors, all of whom were expecting a slight drop in November monthly prices following a €23–25/tonne drop in November styrene contracts.

Local holidays in Europe made it difficult to pinpoint precise ideas for November, but many buyers had already said that they did not expect to be able to achieve a price drop any higher than the styrene drop in November, as the market was in a fine balance due to production cutbacks.

September and October PS volumes were weak, with one producer estimating them to be down by 10–12% compared with 2010. November volumes are said to be better, down by only 3% compared with 2010.

This upturn in volumes has led to some tightness, acknowledged by buyers.

The success of Styron’s price initiative will depend on how other producers in the European market approach November. Different cost positions could mean that others will forge ahead with the initial plan of lowering PS prices by €10–15/tonne.

Net general purpose polystyrene (GPPS) prices are trading at €1,200–1,250/tonne FD NWE, and sources agree that producers’ margins have suffered throughout 2011, when PS pricing has followed the trend set in the styrene market.

“The situation is bad,” said another PS producer. “We are facing the same situation as in 2005 and 2009.”

Those years saw permanent capacity closures in the European PS market, to cope with a structural change in demand.

“I still expect minus €25/tonne for November PS,” said one buyer. “I think they are just trying to set the scene for December and get people to buy.”

PS is used widely in the packaging and household sectors.

($1 = €0.74)

For more on styrene visit ICIS chemical intelligence

By: Linda Naylor
+44 20 8652 3214

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