Styron proposes timing change for Europe PS contract settlement

19 March 2012 16:50  [Source: ICIS news]

Polystyrene is used in packaging applicationsLONDON (ICIS)--Major styrenics producer Styron Europe on Monday called for the date of the monthly European polystyrene (PS) contract pricing settlement to be brought forward.

The Switzerland-headquartered group said that contract prices should settle in the first week, but no later than the tenth working day of each month, effective 1 May.

The current system – in which orders are typically dispatched and delivered before the contract price of PS is settled – presents a number of inefficiencies, ranging from incorrect pricing to time-consuming accounting adjustments, according to Styron Europe.

The proposed timing settlement change will improve price management and transparency for producers and customers during the month of delivery, it added.

Martin Whelan, the groups global product director for styrenics, said that the initiative was not intended to seek advantage for Styron or any other player over the rest of the sector. Instead, he said, the objective of the move was that it should be an efficiency driver.

Whelan added that PS was alone among styrenics sectors in Europe to settle contract business so late in the month, describing the existing process as outdated, inefficient and frustrating. By contrast, the proposed early settlement should, he said, afford customers knowledge of where they get their volumes from, as well as what the cost would be for them during the period.

The switch to early contract settlements will not affect the operation of the spot market in styrene, which will continue during the course of each month in the same way as always. However, if successfully implemented, it is hoped it should provide greater visibility in the contract sector, he said.

Styron acknowledges that its proposal must enjoy a consensus of approval from members of the industry for it to take off.

Everyone in the industry has got to want this, Whelan said, adding: I wont deny there will be people who feel the current system works for them. However, in extensive discussions with customers, he said he hadn't actually heard anyone who is negative about it [the changes].

From the other side of the industry, the head of packaging purchasing for a large buyer said that he absolutely agreed with the initiative.

Of course it is a good idea. What we would ideally like is a price from the first day of the month. Otherwise, we have to place orders without knowing how much we have to pay for them. There is always insecurity [in the existing system], he added.

Nevertheless, the buyer said that there was the risk negotiations could still be prolonged, if it appeared other suppliers might offer more attractive prices. He added that one important reason the existing, protracted process had come into being was that suppliers initial price proposals had been unrealistic. If they would start with a realistic offer, they could come to an early settlement, the buyer said.

Styron Europe said the prices of a number of other products in the European plastics industry, such as acrylonitrile-butadiene-styrene (ABS) and styrene acrylonitrile (SAN), have traditionally settled early in the month.

The current contract pricing management for polystyrene in Europe does not respond to the realities that stakeholders across the industry face today, including high volatility in feedstock costs, supply and demand of polystyrene materials and/or operating margins, said Paul Moyer, Styrons vice president and general manager for plastics.

The proposed change for pricing settlement will provide improved visibility and timely information to facilitate decision making for both buyers and sellers, particularly when it comes to managing volumes, financials and production planning, he added.

Additional reporting by Franco Capaldo

By: Peter Gerrard
+44 208 652 3214

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