European PS players mull upstream explosion impact

06 June 2014 20:51 Source:ICIS News

LONDON (ICIS)--European polystyrene (PS) costs look likely to fall by at least €35/tonne in June on the back of lower styrene monomer costs in the month, sources said on Friday.

However, an explosion at an upstream feedstock styrene monomer plant is causing fears that availability will tighten towards the end of this month or in July.

The overall impact of the explosion at Shell’s joint venture styrene monomer (SM)/propylene oxide (PO) plant (MSPO-2) at Moerdijk in the Netherlands is still unclear. Feedstock styrene spot prices have reacted strongly since the explosion, rising almost €100/tonne.

A PS seller said that it has settled a few smaller contracts at a reduction of €35/tonne, in light of lower styrene monomer costs in June. Contract talks with medium and larger PS buyers are ongoing.

Nevertheless, it said that the explosion has altered June price expectations from reductions to increases, partly due to expectations of higher demand on the back of restocking activity. Declining styrene monomer spot prices throughout June pushed several buyers to the sidelines in anticipation of lower PS prices in June.

“From today’s perspective, I expect higher [PS] prices than I would have expected last week,” the PS seller said.

“We stand for reliability. That is why we stick to our pricing announcement of minus €35/tonne. What I cannot exclude is that perhaps for certain business, where I would need more styrene than planned, if I had to go to spot and buy PS, then perhaps, I might have to raise prices,” it added.

The seller said that it is closely watching offtake to see how strong demand will be this month, as strong demand could tighten the market and result in higher contract prices.

A PS distributor in the UK said that the explosion has pushed up general purpose polystyrene (GPPS) spot prices by £10-20/tonne, speculating that the Moerdijk plant is likely to be out of commission for about three months. It said that buyers appear to be ordering extra volumes to try and avoid tight availability and higher prices. It expects this price pressure to continue into July.

A German distributor said that its suppliers are still targeting price reductions in June, ranging from €30-45/tonne, depending on order size. It said that a market reaction to the explosion is still to be felt, although it expects demand to pick up in June as buyers become more aware of the potential tightness.

Nevertheless, it cautioned that the European PS market remains relatively long, partly due to volumes of cheap imports from Asia, Russia and the Middle East, though these volumes are small overall and unlikely to satisfy European demand, but at least partially supplement a shortfall.

A distributor in Italy noted that the market is not yet reacting to the explosion and potential tight availability. The distributor also noted very cheap import prices from Russia and said that it expects that buyers are unlikely to purchase domestic European material without a price reduction, citing weak demand.

“For the time being, no panic at all. Everyone confirmed minus €35-40/tonne. All confirmed these prices,” it said.

A buyer said that it has not settled any prices yet, but is expecting a reduction of between €35-45/tonne on the back of lower styrene monomer June contract prices.

Market players expect more clarity on the pricing and supply situation next week.

By Iain Packham