European April EPS prices likely to rise on strong demand

04 April 2014 17:25 Source:ICIS News

LONDON (ICIS)--April negotiations for European expandable polystyrene (EPS) prices have commenced and preliminary indications are for prices to rise, in light of slightly higher feedstock costs and improving demand conditions, buyers and sellers said on Friday.

Primary feedstock styrene monomer (SM) costs rose €15/tonne in April.

Two European EPS producers said they have initially targeted price increases ranging from €30-40/tonne, citing the need for margin improvement amid an improved demand situation.

“From December to February, we were unable to pass on the full SM cost increases. We started to recover some [costs] in March, but not enough to go to a more sustainable margin. In April we’re looking for a €30-35/tonne increase,” a producer said.

Furthermore, it noted that current market fundamentals indicate it is the right time to seek margin improvement.

Sellers also said the European EPS market is more balanced now, following earlier industry rationalisation and the subsequent reduction to production capacity.

Sources indicated that warm weather across Europe, combined with positive economic sentiment, is driving good offtake for EPS insulation grades from the construction sector. Furthermore, demand for EPS packaging grades from the domestic appliance sector is also growing, in line with seasonality and improving economic conditions.

A buyer in northwest Europe said it has settled one contract at an increase of €20/tonne though other negotiations are ongoing. The settlement was not, however, confirmed on the sell-side. The buyer also noted that sellers are bullish with their targeted price increases amid a tighter market and a very strong demand situation.

“We tried to get only the SM cost increase, but the market is very strong so sellers can ask for more than feedstock cost,” it said.

Another buyer confirmed the good demand, but noted that offtake could ease towards the end of the month and the Easter holidays, as end users temporarily close operations.

“I expect the Easter holidays will have a slight impact, in the sense that before Easter construction is on holiday [and] that could ease demand,” it concluded.

By Iain Packham