Price and market trends: Europe March PS prices set to fall on lower feedstock costs

17 March 2014 00:00 Source:ICIS Chemical Business

European polystyrene (PS) prices are set to fall in March following a sharp but anticipated drop in primary feedstock styrene costs, though the extent of the reduction remains to be seen, market sources said on 6 February.

The European March styrene barge contract was confirmed at €1,370/tonne, down €57/tonne from the previous month.

Nevertheless, the European March butadiene (BD) contract price settled up €80/tonne to €1,025/tonne, reaching an eight-month high on the back of tight supply in Europe as well as the US. BD is a key feedstock for high impact polystyrene (HIPS).

Earlier in the week, major European PS producer, Styrolution announced on its website that it will be targeting a €45/tonne price reduction in March.

EU PSTwo other European producers said they will target similar-sized reductions, less than the styrene monomer reduction. One said it is initially targeting a March PS price reduction of €40-45/tonne, citing the higher BD cost and the need to, “cover the increased cost on HIPS.” The targeted price reduction would also offer some margin improvement. Nevertheless, the producer is confident of demand growth in March, partly due to improved weather conditions that should bolster offtake, but also due to the lower price.

“February demand was a bit low. Demand is back. March versus February, already our order book is definitely higher. I think the market is back, it was probably waiting for better prices like now,” it said.

PS prices rose in January and February and sources indicated this has impacted demand, as buyers increasingly operated on a hand-to-mouth basis and reduced inventories. A March price reduction, therefore, is likely to stimulate increased offtake in the month.

“I’m afraid that after two months of [price] increases, buyers have no inventories, they will try to rebuild,” a large buyer said.

Improved demand, however, may not necessarily equate to better prices and margin improvement for producers.

A buyer in Germany said it has already settled a March contract at a reduction of €57/tonne, in line with the lower styrene monomer settlement. Nevertheless, this has not been confirmed on the sell-side. The buyer attributed the price cut to weak demand.

“It is always different between what they [producers] say and do. March demand in Europe is not too good,” it said.

A distributor said it is likely to target a reduction of €25-30/tonne, as its prices are competitive with European producers and demand is likely to be better than January and February. “I think demand for March will be rather good. Probably not too much higher than January, February. I expect continued good demand,” it said.

Furthermore, it added: “We have seen such a volatile market in 3Q, 4Q last year, and now in the new year, maybe buyers are a bit cautious not to make same mistakes during 2H last year. Also seasonality may help a bit, more demand.”

By Iain Packham