FocusAsia EPS stays firm on strong SM prices; demand remains weak

27 June 2012 04:04  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS)--Expandable polystyrene (EPS) prices in Asia will be buoyed by strong prices of feedstock styrene monomer (SM), with offers for the resins remaining firm at $1,510/tonne (€1,208/tonne) in spite of lacklustre demand, market sources said on Wednesday.

“Feedstock styrene (SM) prices are stable at around $1,300/tonne [CFR (cost & freight) NE Asia], hence our resin offers are also unchanged from last week,” said a Taiwanese producer.

In the week ended 22 June, EPS prices were assessed at $1,480-1,500/tonne CFR NE Asia, while feedstock SM was up by an average of $25/tonne week on week at $1,290-1,310/tonne CFR China, according to ICIS.

“With SM prices now firming, we have to increase resins prices to match the rising feedstock costs,” said another producer in Taiwan.

Early last week, EPS deals were concluded at around $1,500/tonne CFR NE Asia but prices have come off later in the week as buyers became hesitant to procure cargoes when US crude fell to $78/bbl levels, market sources said.

EPS suppliers are insisting on prices above $1,500/tonne CFR NE Asia to generate better margins.

Spot prices peaked in March this year at around $1,685/tonne CFR NE Asia before trending down to $1,500/tonne CFR NE Asia in June.

EPS is made into styrofoam, which is used in packaging a wide variety of items like food, toys and consumer electronics.

Indicating weak demand, the price premium being commanded by flame retardant (FR) EPS over packaging resins has shrunk to around $60/tonne in June from $70-80/tonne for the most part of the first half of 2012, market sources said.

Consumption of FR EPS in China’s construction sector has slackened as the domestic economy is slowing down.

Overall EPS demand in Asia is soft, with the exports sector of the key China market remaining in doldrums amid the debt crisis in the eurozone and the US economic weakness.

Demand for the resins seasonally picks up during the third quarter – when China’s manufacturing activities go on full swing, in anticipation of strong exports season in the fourth quarter.

However, with the current global uncertainties, demand for EPS from the Chinese exports sector has not shown any significant improvements so far.

Consumption of FR EPS for construction has also slackened in China as the economy continues to slow.

Operating rates at EPS facilities in China have averaged below 60% this year, as producers cut production to prevent stocks from building up. With the short shelf life of EPS resins of about six to nine months, suppliers need to keep inventories at manageable levels.

Major EPS producers include the Loyal Group, Ming Dih Group and Taita Chemicals of Taiwan and Wuxi Xingda Foam Plastics, Leasty Chemicals and Garson Chemicals of China.

($1 = €0.80)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Clive Ong
+65 6780 4359

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