Europe EPS makers mull lower output on pricey styrene, weak margins

LONDON (ICIS)–The European expandable polystyrene (EPS) market is bracing for potentially difficult February contract price discussions as the feedstock styrene barge contract recorded another three-digit increase for the month, sources said on Friday.

Based on indications from the European styrene spot market, an upward movement was more or less expected, but not at this level, and that has created a lot of concern among EPS market participants.

According to EPS sources, margins are weak and styrene is expensive, while the upward pressure on pricing in Europe could persist for the rest of the first quarter given several production issues in the US styrene market.

Consequently, there was extensive market talk that EPS producers were considering of cutting back production rates, while one of them was said to not be producing at all for February, although the reason why remained unclear.

Meanwhile, some converters in Germany and Austria were also thinking of reducing their production.

On the EPS pricing front, producers are targeting increases of €200-260/tonne, while buyers are waiting to get a better market overview and then define their targets for this month.

It will be a very difficult task to pass on the full monomer increase but some producers said that there is no other option as profitability is low while the wintertime does not help demand.

Sources from the buy side said that they will only purchase what they need and, at the same time, make optimum use of stocks.

Nevertheless, others that did not buy at all in January will be forced to place their orders now.

Sources said that in the construction business it would be difficult to switch from EPS to other materials, but in other industrial sectors like packaging, for instance, EPS competes with paper.

Although changing EPS for other products may not be easy, the high prices, as well as the volatility in the market, are encouraging some market participants to look towards other alternative directions.

Focus article by Vasiliki Parapouli

(Picture source: Creativ Studio Heinemann / imageBROKER/REX/Shutterstock)