Resistance from buyers as PC makers target increases

21 November 2012 16:44  [Source: ICIS news]

LONDON (ICIS)--Styron Europe’s announcement of price increases for its polycarbonate (PC) compounds and blends on Wednesday was met with resistance from most downstream players which say it is not the right time for a hike.

Styrenics producer Styron said it would increase PC prices by €0.23/kg (€230/tonne, $295/tonne) effective 1 December.

"With margins well below acceptable levels in Europe, this increase is essential to return to sustainable levels,” said Nicolas Joly, product market manager for polycarbonate, compounds and blends at Styron.

However, most sources in the market said this is not a realistic target as players are destocking and the market currently overflows with material.

"It is not the right time as everybody can get the volumes they want and the other producers are rolling prices over in December," a PC buyer said.

Most players agreed that increases will only be possible in the first quarter next year, but even then only by about €0.05/kg because demand is poor and the market is oversupplied.

"Raw material costs are very high and production costs keep going up, but at the same time demand is so poor we simply cannot pass anything on, even though we need at least €300/tonne," a second major producer said.

Earlier in November, a third producer, Saudi Arabia’s petrochemical major SABIC, announced its plans to increase prices by €200/tonne, but so far this does not seem to have materialised.

"Buyers are reluctant to accept increases, what's more, they are asking for reductions, so I think the best case scenario will be a rollover," a distributor of Asian material in Europe said.

PC demand has been impacted by poor construction and automotive output.

EU construction levels slumped in September following a slight increase in output in the previous month, declining by 1.8% in September compared with August, according to statistics office Eurostat.

Construction output in the eurozone fell by 1.4% month on month, the agency added. The construction sector is one of the key downstream markets for the PC industry.

In addition, the European Automobile Manufacturers’ Association (ACEA) said EU new car registrations continued to shrink in October, with 959,412 new passenger cars being registered in the EU, down by 4.8% from the same month in 2011.

"I have not accepted an increase and expect prices to remain stable for Q1 [the first quarter]. If there is a change then I have a realistic expectation that the price will come down," a PC buyer from the optical media industry said.

Contract negotiations for the first quarter will begin in coming weeks and settlements are likely in January.

Fourth-quarter general purpose (GP) moulding grade PC prices are at €2.25-2.45/kg free delivered (FD) northwest Europe (NWE), while GP extrusion grade PC is at €2.15-2.25/kg FD NWE.

($1 = €0.78)

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By: Janos Gal
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