Buyers have mixed reaction to NOVA EPS plant sale

11 May 2012 20:51  [Source: ICIS news]

This is EPSHOUSTON (ICIS)--Reaction was mixed in the North American expandable polystyrene (EPS) market to news of the sale of NOVA Chemical's EPS business to Canada-based PFB, but the overwhelming sentiment was one of surprise, sources said on Friday.

Under the terms of the deal, announced on Wednesday, NOVA will sell its performance styrenics business to PFB, including its EPS and ARCEL resin products. Closing is expected to take place in the second half of 2012, the companies said.

PFB, which operates in Canada as Plasti-Fab, is a manufacturer of insulating building products, which uses EPS as a raw material. The purchase of NOVA's EPS plants in Monaca, Pennsylvania, and Painesville, Ohio, will provide PFB with the resin it needs to manufacture its products.

The move took the market by surprise on at least two fronts. Many market participants said they were not even aware that NOVA had plans to sell its EPS business. Others were surprised that an EPS moulder would have the means to take over one of North America's largest EPS suppliers.

While PFB already makes a small amount of EPS for captive use for its operations in Canada, sources said the more than 120,000 tonnes/year of resin NOVA produces each year is well more than PFB could ever use.

"That is like Jonah swallowing the whale," said one source.

While some buyers said they were still trying to figure out what the move would mean for them, others said they were cautiously optimistic it would be a stabilising influence on the market.

One buyer said the sale is good for the industry because it means NOVA's plants will stay open. It is not likely that PFB, which needs the material, would buy the plants just to shut them down, the buyer said.

While PFB focuses on the construction sector, NOVA also produces EPS resin for the packaging, cup and container markets. Sources said they believe PFB will continue to serve other markets.

The purchase of NOVA's US-based plants is just the latest in PFB's efforts to expand further into the US market. In April, the company announced that it had begun manufacturing insulation products at an EPS moulding plant it acquired from Knauf USA Polystyrene, located in Lebanon, Ohio.

It is too soon to say how competitive PFB will be with other moulders in the US market, sources said. But some market participants noted it will be an unusual situation.

"[PFB] will become other moulders' competitor and supplier at the same time," said one market participant. "I would not like my competitor to control the price of my main raw material."

The deal caused further speculation among buyers about the sale of US EPS producer Flint Hills Resources, which announced in October it had plans to sell its 120,000 tonne/year EPS unit in Peru, Illinois.

No announcements have been made about the progress of that sale, a company spokesman said on Friday.

By: Michelle Klump
+1 713 525 2653

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