By Clive Ong
SINGAPORE (ICIS)--Expandable polystyrene (EPS) suppliers in Asia have increased offers this week after reducing it last week on a rebound in feedstock styrene monomer (SM) values though demand is likely to remain subdued, market players said on Thursday.
SM prices dipped below $1,750/tonne (€1,313/tonne) CFR (cost & freight) China on 19 August before staging a rebound to the mid-to-high $1,700s/tonne CFR China for the week ended 23 August, according to ICIS data.
Consequently, EPS suppliers had to reverse course and increase offers this week to around $1,940-1,945/tonne CFR Asia, from around $1,930/tonne CFR Asia last week.
Producers usually strive for a $180/tonne spread between SM and EPS but in recent months they were seen to be accepting a smaller premium as demand was lacklustre.
“The volatility in the SM price has made buyers uncertain and they are hesitant to commit,” said a producer in Taiwan.
Overall demand in Asia stayed weak as exports of finished goods to the US and the Eurozone remained in the doldrums.
Escalating tensions in the Middle East, particularly the prospects of a military strike on Syrian government by the US and its allies, further weighed on sentiment as EPS buyers anticipate potential negative impact on global economic growth.
In Asia, apart from a slowdown in China, currency crisis in India and Indonesia also fuelled speculation that another financial storm could hit the region.
“Buyers are mostly keeping away despite having low stocks as economic outlook is increasingly uncertain,” said an EPS distributor in southeast Asia.
Meanwhile, the average operating rate of EPS units in China remained below 60% in August, lower than the typical level for a third quarter manufacturing season.
“There is little chance of a significant pickup in demand in September, in fact buying momentum is waning,” said another producer in Taiwan.
Some traders, however, expect some pre-buying activities to surface in September, ahead of the long Chinese holiday in October.
Other were less optimistic and prepared for demand to be largely unchanged in September.
EPS is used to make styro-foam which is used in packaging as well as insulation panels in roads and buildings.
($1 = €0.75)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections