EPS players mull impact of upstream explosion

06 June 2014 23:59 Source:ICIS News

LONDON (ICIS)--Several European expandable polystyrene (EPS) players remain in negotiations over June contract prices, they said on Friday, following an explosion at an upstream plant which produces feedstock styrene monomer and accounts for about 10% of the European market.

The 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, though several EPS market players expect it to tighten supply later this month or in July.

Feedstock styrene spot prices have reacted strongly since the explosion, rising almost €100/tonne. EPS sources expect the impact of the explosion to last for several months.

One seller said it will examine the impact of the explosion and anticipated upstream tightness before settling June EPS contracts. It noted that before the explosion, it had anticipated a €10-20/tonne drop in June EPS contract prices, in light of weakness in styrene spot prices in May.

Now, however, the picture is unclear and it expects price reductions to be unlikely, especially in light of the good EPS demand this year.

“June not settled yet because of Moerdijk,” the seller said, adding: “[There is] going to be a shortfall in styrene availability, maybe not noticeable this month.”

“Had that not happened, we were probably prepared maybe to give a symbolic drop in EPS €10-20/tonne, not more, but since the accident, we have revised our position. We don’t think there is any need to drop the price anymore.”

Several buyers, however, said that they have already settled some June contracts, with reductions ranging from €30-45/tonne. Buy side sources indicated that the Moerdijk explosion is not currently impacting June contract prices.

“We got some contracts now for June. Reduction of €30-40/tonne. Depends on suppliers,” it said.

Another buyer said it hasn't settled June prices yet, but expects prices to soften slightly in light of lower June contract styrene monomer costs (See below).

“At the moment we are discussing about the price for June. Talking of range decreasing between €35-45/tonne. We have already closed one at -€40/tonne. Not big volume, not big supplier,” it said.

Buyers generally indicated that June demand is likely to be higher than in May. Weakening styrene spot prices in May pushed several EPS buyers to the sidelines in anticipation of lower EPS contract prices in June. Furthermore, several bank holidays in Europe in May reduced the number of working days and activity, resulting in softer-than-usual offtake.

More clarity is expected on June EPS contracts next week, once market players have had time to digest and understand the implications of the Moerdijk explosion.

Looking ahead, sources expect the summer holiday season, which is already starting to take hold in Europe, to diminish demand over the next couple of months.

By Iain Packham