Europe PS firms focus on quality shift as margins flatline – bank

29 November 2011 16:17  [Source: ICIS news]

LONDON (ICIS)--Polystyrene (PS) producers in Europe presently see no sign of a significant recovery in margins and are busy improving their profitability by shifting standard capacities to higher-margin advanced products, Austria's Raiffeisen Centrobank said on Tuesday.

“Higher-quality production should keep demand at stable levels, with buyers preferring such output and continuing to shift to more sophisticated products,” said Raiffeisen analyst Dominik Niszcz.

Germany's BASF and France-based Total Petrochemicals will launch higher-quality grey expandable polystyrene (EPS) within two years, while Austria's Sunpor will add 65,000 tonnes/year of modern EPS by 2013, said Niszcz.

At Poland's Synthos, work is underway to shift about 20,000–30,000 tonnes/year from 130,000 tonnes/year of general purpose polystyrene (GPPS) production into advanced EPS, he added.

“From talking to a Synthos representative I gather they believe that within two years the golden times, such as in 2006, may return for polystyrene producers due to the lack of additional capacities [due to come on stream] and sellers' improving production processes. Of course, that is provided there is no major recession in the CEE [Central & Eastern Europe region],” said Niszcz.

“The weak margins on the polystyrenes market in Europe are largely a result of overcapacities, while the current investments in modern EPS plants coupled with the uncertain situation of the construction industry limits the chances for a quick [PS] margin recovery,” he added.

In the first nine months of this year, Synthos recorded an earnings before interest and tax (EBIT) margin of only 3.5% for PS, Niszcz said.

PS prices reached their highest level this year during August and September and remained flat thereafter, he added.

“Stable or falling prices of oil derivatives, including benzene and styrene, may lead to a strengthening of the operating margin which offsets the weakening demand,” said Niszcz.

For more on PS visit ICIS chemical intelligence

By: Will Conroy
+44 20 8652 3214

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