In February, European polystyrene (PS) producers resisted conceding price reductions to converters from a drop in raw material costs, initially targeting a price rollover, despite the €40/tonne drop in the monthly styrene monomer (SM) contract. At the end of February, suppliers confirmed a reduction of approximately €15/tonne for sales to direct customers.
March PS demand began quite well, possibly due in part to some pre-buying. Players on both sides of the market said prices increased by €20-30/tonne, driven mainly by higher monomer values.
Prices fell in April as producers responded to lower styrene costs, following the €64/tonne reduction in the styrene contract price. Most sources confirmed that a reduction of €50/tonne was broadly representative.
Demand recovered in May, with most sources indicating that consumption registered a distinct improvement. However, the recovery in demand did not signify a strengthening in prices. Most sources agreed that values, up to 24 May, slipped by €5-10/tonne. While this was only nominal, it offered producers no opportunity for margin improvement.
The European PS market has been suffering from an imbalance of supply and demand for an extended period, leading to extremely poor margins for producers. This has prompted them to take remedial action to rebalance the market, by retiring some production capacity in the continent. Since reducing capacity, there is evidence that producers have succeeded in improving margins.
In the US, prices which reached record highs in the first quarter, along with record high benzene costs, dropped slightly over March and April. Prices were expected to rise again in May, based on supply constraints resulting from a series of production shutdowns related to flooding events in the US Midwest. Prices remain near peak levels for the market, which is one factor that has caused demand to slip. Market participants said they are not expecting growth in 2013.
In Asia, the margins of PS producers have been squeezed by strong feedstock SM prices at above $1,700/tonne CFR China. With PS prices still trading below $1,800/tonne CFR China, suppliers lamented their lack of profits. Demand has not picked up significantly, although suppliers were generally cautiously optimistic of some improvement in June, ahead of the third quarter manufacturing season in China.
Updated to mid-May 2013