Europe PS players see higher July prices on feedstock spike

04 July 2014 17:51 Source:ICIS News

LONDON (ICIS)--European polystyrene (PS) players are slowly starting to settle July contracts, with sharp increases on the table, following a surge in feedstock costs, sources said on Friday.

The European styrene barge contract for July was agreed at €1,442/tonne, up €82/tonne from June.

PS producers said they are targeting increases of €80-100/tonne for both general purpose polystyrene (GPPS) and high impact polystyrene (HIPS) in July.

One producer said it has settled a few initial contracts at increases of €90-95/tonne, though this has not been confirmed on the buy side.

“I can report one settlement of plus €90/tonne with a big player in packaging. A few settlements with injection moulding at one at plus €90/tonne, a few at plus €95/tonne,” it said.

This was not confirmed on the buy side.

Buyers recoiled at the size of the targeted increases, having expected price hikes more in the region of €50-80/tonne.

“Demand is awful, how do they think they are going to increase margins. I would have expected something far more sensible. I’d have hoped settlements more like up €50/tonne,” one said.

"There is this no shortage, but it’s a real supplier’s market. What I'm trying to do is get in with Asian sources to order, for the rest, difficult for me to do something in this price situation,” another buyer said.

Buyers and sellers alike generally expect July demand to be weaker than in June, partially due to the summer holiday season in Europe, but also due to the large price hike. Sources also spoke of some pre-buying in June, limiting July demand, as several players anticipated sharply higher July prices.

A seller said that demand so far in the year has been broadly to plan, with offtake in the second quarter matching its expectations. It said sales had been strong in June, but attributed this partially to a turnaround at a competitor. It said that in the last month more was sold than produced.

“We expect to be closing above styrene monomer [in July], or close to it. Up €90/tonne would be probably be the average. Demand isn’t that weak,” it said.

The seller said that demand from the appliances sector is doing well, construction is coming back well, though packaging demand is seeing some declines, with some product substitution.

Overall, it said weak demand in southern Europe is being offset by slight growth in northwest, central and eastern Europe.

Another producer, however, said that demand from the appliances sector is fairly stable, demand from the construction sector is stable also fairly stable and packaging demand is fairly good.

It said that demand in the summer season seems slightly gloomy, noting that the cost increase will make exports difficult as PS will be less competitive than Asian alternatives.

“In July, in Europe, expecting a bit lower demand versus June. In exports, now getting more difficult again, with this kind of cost increase.”

A packaging producer in eastern Europe said that demand is not as strong as usual for the time of year and feels that the price increase is too strong. this view was also shared by buyers in northwest, southern and central Europe.

A buyer in central Europe said it is a seller’s market as there is no shortage of supply, adding that it is examining overseas supply options and is in talks with suppliers from Asia and North Africa.

A smaller buyer in Italy said that it would not order any material in July at a price increase, saying there is no motivation, as it cannot pass on the hefty price hike.

“Quotation for July, from different suppliers, all asking for increase, but simply I am not buying. I will not accept price increase, very simple,” it said.

A distributor said it is offering July contracts at an increase of €50-60/tonne, but said the market is quiet. Nevertheless, it noted that it had not given away price reductions in June.

The FD (free delivered) EU and UK numbers above are used as a reference price and are reported on a gross basis. They are subject to heavy discounts. The distribution quote refers to business at smaller and medium-sized accounts that have a maximum discount of 2%.

By Iain Packham