Europe PS producers target more price hikes, buyers protest

05 October 2012 16:09  [Source: ICIS news]

LONDON (ICIS)--Several European polystyrene (PS) producers have announced a further substantial increase in their prices for October, sources said on Friday.

Global styrenics major Styron Europe said it would increase general purpose polystyrene (GPPS) and high impact polystyrene (HIPS) by €50/tonne ($65/tonne) for October with immediate effect.

“The price increase responds to the rising costs associated with the manufacturing of polystyrene grades in Europe,” the statement said.

Earlier in the week, fellow European major Styrolution announced that it would raise its prices this month by the same amount.

It is believed that Total Petrochemicals has also made known its intention to raise prices by €50/tonne in October but there was no confirmation from the company.

Although the October styrene monomer barge contract was settled on Thursday at an increase of €8/tonne, PS producers have argued that styrene spot values have risen sharply since the beginning of September, placing their production costs under increasing pressure.

While PS producers are adamant that they are not prepared to suffer any further erosion of margins due to escalating raw material costs, buyers are equally vehement in their protests that any further rise in the PS price is unsustainable.

The buy side consensus at the end of the first week of October appeared to be that a price rollover was all that could be accepted this month. One large consumer said one of its suppliers had already confirmed that it agreed to a rollover.

“It’s crazy,” said another buyer. “It’s absolutely impossible to sustain another increase".

A source countered that the ambition effectively to improve margins by around €40/tonne was both "fair and correct".

He said that the strategy was justified by three factors: utilisation of assets, stock position, and demand. However, he recognised that PS prices are very high, especially compared with some competitive materials, and some converters might be tempted to switch from PS.

Ultimately, margin improvement constituted the compelling argument, he said. "Is there a risk? Yes. Do I have a choice? No."

A Styron spokesman agreed that October was going to be a very difficult month.

"Supply/demand dynamics are driving prices” he said. "As a producer, we have an urgent need to restore margins."

($1 = €0.77)

By: Peter Gerrard
+44 208 652 3214

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