LONDON (ICIS)--Monthly contract negotiations have started in the European polystyrene (PS) market this week with further downward pressure on prices amid another triple-digit drop in upstream costs, sources said on Friday.
- Multiple sellers already sold out for December
- Supply issues for certain grades expected to improve as Rhine water levels rise rapidly
- Many expect PS prices may have bottomed out with rises anticipated in early 2019
The styrene barge contract fell by €150/tonne earlier in the week, falling to two-year lows.
Although most participants anticipated another drop in feedstock costs, such a steep erosion was not expected and has spurred buying appetite above normal levels for the time of year for many businesses.
Some buyers expect that upstream costs are likely to begin rising in the first quarter of next year and that PS prices may have bottomed out in the near term, which has encouraged some to place additional orders for the month and engage in restocking or pre-buying activity.
Not all on the buy-side are able or willing to restock inventories, however. As the end of the year approaches, businesses tend to de-stock for accounting purposes, the pressures of which can be significant.
Adding to this, not many buyers have the silos and other storage facilities to build up volumes above typical monthly requirements.
Nonetheless, order entries have been strong for many sellers for the time of year, adding to a surge in buying interest that started last month, with some distributors already sold out of product for December.
“The order intake is enormous, everyone is thinking it’s the right time to buy… we sold out in a few days actually… [we] can’t fulfil all the orders at this moment,” one distributor said.
With demand so high, some sellers having been targeting decreases not in line with the full monomer drop, in an attempt to shore up margins which have eroded somewhat through the year due to rising energy and transport costs.
Adding to the counter-pressure is ongoing tightness for certain general purpose polystyrene (GPPS) grades. BASF’s production woes linked to low Rhine water levels have continued this week with some material still being allocated and some orders having to be refused.
However, the water levels have improved dramatically over the course of the week and some expect BASF's production cutbacks could well ease significantly or clear up completely next month, if the trend continues.
Looking ahead, the market is expected to quieten in the coming weeks as the holiday season across Europe begins and production and consumption slows.
Most contracts are likely to settle by the end of next week owing to December being a shorter working month.
Early sentiment for January prices are firmer as some continue to expect higher styrene costs throughout Q1 as demand is anticipated to grow and turnarounds in some upstream markets are expected to begin, potentially impacting availability.
GPPS is used in food packaging, disposable utensils, cutleries and various other consumer items. High impact PS (HIPS) is used in consumer electronics and toys.
Focus article by Ciaran Tyler
(Picture source: WestEnd61/REX/Shutterstock)