Corrected: Europe PS buyers concerned over producer pricing

03 September 2013 17:55 Source:ICIS News

Correction: In the ICIS story headlined “Europe PS buyers concerned over producer pricing” dated 3 September 2013, please read in the third paragraph … seeking to raise both HIPS and GPPS by €105/tonne … instead of … seeking to raise HIPS by €110/tonne and GPPS by €105/tonne … A corrected story follows.

LONDON (ICIS)--European polystyrene (PS) buyers are concerned that producers are trying to push through hikes above the styrene monomer increase, which could further impact downstream demand, sources said Tuesday.

Styrolution and Styron, two of the four major European producers, have both separately stated that they are seeking increased prices for general purpose polystyrene (GPPS) and high impact polystyrene (HIPS), ahead of the monomer styrene settlement price.

According to its website, Styrolution is seeking to raise both HIPS and GPPS by €105/tonne ($138/tonne) for September from August. Styrolution will maintain a HIPS surcharge of €110/tonne.

According to Styron’s website, it is seeking a €100/tonne increase for both GPPS and HIPS for September.

Both companies' price targets are independently above the €85/tonne increase in the September styrene monomer barge contract.

According to ICIS pricing history, FD EU domestic GPPS and HIPS prices reached a record high on 16 August, with GPPS in a range of €2,035-2,070/tonne and HIPS in a range of €2,130-2,165/tonne. Prices have remained stable at this high since the second-half of August.

Buyers said this bullish pricing initiative by PS producers has been evident for the past few months, and warned that this is affecting demand as customers look for alternatives to PS.

Citing a near 10% decrease in PS production capacity in 2012, one buyer said: “The market is shrinking, there is less material about, producers have more control over the price. Sooner or later, the bubble's going to burst. I don’t think they can continue putting prices up. We're in a world recession still; I just don't see how these prices keep going up and up and up.”

“Every month demand is dropping. Increasing prices are already impacting on demand, people are using alternative materials,” the buyer added.

Another buyer said: “I would say there’s a lot of caution. I think people will buy just what they need in the market. I don’t think anyone's going to buy huge quantities at this price.”

It added that negotiations are on-going. “Probably even producers are trying to digest this last round of [upstream monomer] hikes.”

The buyer noted that in terms of demand, September is expected to be weak.

A producer said it has listened to these concerns for the past six months, but noted that in each month, an event has taken place to put upward pressure on prices.

“I’m fully aware that a lot of our customers are struggling with that,” it said. 

However, it noted that PS is a margin business and the margin is not currently high enough to easily compensate for the styrene monomer increases.

Both sides are hopeful for prices to ease over the next few months, as that would help revive buy-side demand and boost sell side utilisation rates and therefore profitability.

The producer said: “The current price compared with other products like polypropylene, is a threat. Therefore, I also hope that a certain reduction in raw material prices could put us in a position to offer lower polymer pricing, because this would surely help the market.”

PS Europe FD HIPS vs GP-03-09-2013

Styrene Contract Vs Spot- 03 09 2013

($1 = €0.76)

By Iain Packham