FocusAsia EPS makers lower offers to stoke buying

03 April 2013 08:59  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS)--Asia expandable polystyrene (EPS) suppliers have lowered offers in a bid to stimulate buying momentum but end users have not stepped in yet, though demand is expected to resume from the construction industry later in this quarter, market sources said on Wednesday.

Offers of packaging resins were quoted at around $1,850/tonne (€1,443/tonne) CFR (cost & freight) NE Asia, down by $30/tonne from last week. Buyers were largely unhurried with buying indications some $20-30/tonne lower than the reduced offers.

“Even with lower offer, buyers are not stepping in aggressively,” said a Taiwan-based EPS producer.

Demand has weakened for EPS as the Chinese export sector remains in the doldrums.

Weak economic conditions in the Eurozone and the US have dampened demand for Asia made goods.  

The US economic recovery appeared weaker than previously thought as new data showed slower than expected improvement.

In Europe, the Cyprus bank deposit levy crisis and the deadlock in the Italian elections last month, and Italy’s rejection of austerity weighed further on the Eurozone’s attempt to boost economy.

Besides, trade in Asia has declined amid the Easter holidays last week and the upcoming Tomb Sweeping festival this weekend. On this day, the family members will visit the tombs of their ancestors - a Chinese tradition and the country will be closed on 4-6 April.

“Many buyers have put off purchases amid the holidays and business will likely remain slow until the second week of April,” said a China-based EPS maker.

However, the Chinese construction industry is moving into higher gear in the second quarter that will generate demand for EPS.

The construction sector usually peaks in summer while building activities during winter are slower due to the cold.

Consequently, demand for block flame retardant (FR) resins is likely to continue improving as consumption of insulation panels - made from EPS - will increase during the seasonal construction peak in the middle of the year.

The average operating rate of EPS units in China rose to 54% for the week ended 29 March, up from around 40% a month earlier.

“Demand for FR resins is increasing so it is an off-set against poor packaging resins consumption,” said an Asian EPS distributor.

EPS suppliers in China continue to face excess stocks with parcels regularly being shipped out to southeast Asia, Europe, the Middle East, Latin America and Africa.

“The supply overhang is not going away, so apart from low run rates, Chinese producers will have to keep seeking buyers outside of China,” said a distributor in southeast Asia.

With feedstock styrene monomer (SM) prices staying firm at around $1,700/tonne CFR China this week, margins for EPS makers remained squeezed. Most EPS makers target a spread of $180/tonne for EPS over SM values.

“Current margins are inadequate as EPS prices are less than $150/tonne over SM prices,” said another Taiwanese maker.

($1 = €0.78)

By: Clive Ong
+65 6780 4359

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