Styron calls for new approach in European PS pricing
Peter Gerrard
18-Oct-2012
By Peter Gerrard
LONDON (ICIS)–Major polystyrene (PS) producer Styron has
called for a new approach to European PS price negotiations
because of what it believes to be a significant shift in the
balance of supply and demand in the market.
In an exclusive interview with ICIS on
Thursday, Paul Moyer, general manager plastics for Styron,
enlarged on the company’s press release of the same day in
which it announced that it intended to adopt a new approach
to negotiations.
“The intention is to de-couple pricing from styrene monomer,
which does not adequately depict the value of the polystyrene
in any given application” said Moyer.
He asserted that the monthly styrene monomer barge contract
has been more of a “constraint” than an anchor in the
settling of PS prices in the discussions that ensue between
sellers and buyers every month.
“Margins [for producers] have been compressed, particularly
over the summer, but now is the time for industry players to
focus on the value of the resin in a particular
application”.
Styron’s new strategy has been prompted by a reduction in PS
production capacity arising from the closure this month of the
200,000 tonne/year plant operated by Styrolution in Marl,
Germany, and also by the conversion of one of Total’s
production lines in Feluy, Belgium from PS to expandable
polystyrene (EPS).
The closure of the Marl facility alone is estimated to
represent approximately an 11% reduction in capacity in
western Europe, in the eyes of producers bringing about a
substantial shift in the market’s balance of supply and
demand.
Others are less convinced that a reduction in installed
capacity will have a lasting impact on market balance,
pointing to impending production from two new plants in the
Middle East.
“There is a small window they [European producers] are trying
to exploit. The reality is the picture isn’t changing,” said
one buyer.
A distributor was even more forthright.
“They are kidding themselves if they think the market is
balanced to tight.”
The distributor acknowledged, however, that PS offered the
smallest margins in its portfolio.
Nevertheless, producers insist that they see, in Moyer’s
words, “a change in the landscape”, which should last at
least through 2013.
With European lines of production having been retired, they
state that operating rates are now well over 90%, and it is
this that is driving distinct movement in favour of
suppliers.
Mr Moyer dismissed the potential threat from imported Middle
Eastern material because the reliability of supply and
product quality available from existing European producers
would take a long time for new entrants to establish.
A Styrolution company source said the Marl closure was a
cost-cutting exercise. “Polystyrene is a commodity and
margins are linked to asset utilisation and utilisation is
higher, so prices need to be higher,” the source said.
While acknowledging that high utilisation rates were a
crucial factor in producers’ ability to secure improved
margins, which “have been almost unsustainable,” Moyer
emphasised that his company’s engagement with its customers
was a “collaborative partnership.”
“The key is to understand the value of our products to our
customers,” he said, adding that this also strongly implied
higher prices.
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