14 December 2012 10:02 [Source: ICB]
Polystyrene (PS) is a thermoplastic resin used in many applications, including food packaging, domestic appliances, electronic goods, toys, household goods and furniture.
Oversupply and a lack of profitability spurred the permanent closure of the 180,000 tonnes/year plant operated by Styrolution in Marl, Germany, in October 2012. Total also decided to convert one of its lines from PS to expandable polystyrene (EPS) at its plant in Feluy, Belgium, although the company has not disclosed the capacity of lost PS output this represents. These closures followed the shutdown of some 350,000 tonnes/year of capacity in the Netherlands, Spain, France and Germany undertaken in 2009 for the same reason.
As a result, utilisation rates are reported to have increased to well over 90% by the end of 2012, although previous hopes of higher operating rates in the wake of the earlier round of capacity cuts were disappointed.
Overall demand in Europe was no better than flat in 2012, compared with 2011. However, some buyers estimate that their consumption will probably have fallen by about 7-8%.
European PS buyers faced increases of about €90/tonne in September 2012, with producers saying they found it hard to keep pace with the speed of hikes in the upstream styrene market. Producers also stated that they were able to achieve the substantial increments because the market had tightened and demand had picked up.
Contract discussions in October were tough. By the end of the month, prices had risen by approximately €30/tonne. Producers reiterated that a shift in the balance of the market was underway. This was especially because of the 180,000 tonne/year plant in Marl, Germany, ceasing output in October, they claimed.
By late November, a few small movements both up and down had been seen, but players reported that prices generally remained unchanged, compared with October. Producers entered December with a continued resolve to effect a modest improvement in their margins. Therefore, a €15/tonne increase in the contract price of styrene monomer prompted calls from suppliers for increments of between €20-40/tonne for both general purpose polystyrene (GPPS) and high impact polystyrene (HIPS).
Three types of processes are generally used: suspension, solution and mass polymerisation.
As a result of the curtailed capacity in 2012, European producers are confident that the structural supply balance will remain in the medium term more favourable for them than it has been in the past three to four years. Nevertheless, new capacity slated to come on-stream in Saudi Arabia and Egypt in early 2013 may pose a threat to European suppliers, in that some material from the new plants could be destined to cross the Mediterranean.
The outlook for consumption and prices over 12 months is hazy, given the volatility seen during 2012 and the array of factors that could influence the price evolution of the market. These factors, at the end of the year, included high feedstock costs (reflecting scarcity of benzene supplies), tighter supply and higher operating rates among European producers, potential availability from the forthcoming facilities in Saudi Arabia and Egypt, and the relatively gloomy prospect for European economies, especially in key markets in the south of the continent, such as Italy.
These factors could have either a positive or negative impact on values, with any single one coming to the fore at different moments, making for a continuation of the volatility of 2011-12.
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