31 January 2014 10:02 [Source: ICB]
Americas Styrenics announced it would raise the price for all grades of PS by 5 cents/lb, effective 1 February
US polystyrene (PS) contract prices for January were assessed higher on 24 January, based on rapidly rising feedstock benzene costs.
Producers had announced increases of 6 cents/lb for the month, and sources said those increases have been implemented. However, after taking into account a realignment of prices that occurred among some market participants during negotiations for 2014 contracts, the assessed range is only 2 cents/lb higher than the published December range.
Contract negotiations for 2014 were particularly involved in 2013, according to market participants. They said there was a significant push to move buyers away from formula-based pricing contracts to a more market-based pricing system.
“It was a big year, because a lot of the producers are getting away from the cost-plus-based pricing,” said one buyer, referring to contract negotiations for 2014. “I am being told that it is almost all gone and that very few customers still have those formulas.”
Producers made the move in an effort to add more margin to the PS business, particularly at a time when styrene can be sold on the spot market for a premium because of supply tightness.
In October, as previously reported by ICIS, Americas Styrenics CEO Brad Crocker said the company was “moving away from commercial agreements based on feedstock price, which have been the norm for the past decade, toward agreements that better reflect the value and potential for alternative uses of styrene in the global arena.”
Styrene spot prices have continued to move higher in recent weeks, hitting a record high the week ended 17 January, based on high benzene spot prices as well as globally tight supplies.
BENZENE TRIGGERS HIKES
Benzene contract prices for January rose by 8% to $4.84/gal from December levels. However, spot prices have traded well above $5/gal in recent weeks.
The higher feedstock costs have already resulted in at least one PS producer announcing an additional February price increase. On 23 January, Americas Styrenics announced it would raise the price for all grades of PS by 5 cents/lb, effective 1 February. It was not clear yet whether other producers would also announce February increases. Sources have said there is a concern that additional price increases will hurt demand.“If prices stay this high, there could be trouble,” said one broker.
After the increase, US January PS contract prices were at 107-109 cents/lb for bulk GPPS (general purpose polystyrene) DEL (delivered) and at 115-117 cents/lb for bulk HIPS (high-impact PS) DEL.
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