European EPS early April contracts drop €110-150/tonne, demand weaker than expected

LONDON (ICIS)–European expandable polystyrene (EPS) early April contracts have been agreed at decreases of €110-150/tonne, largely in line with the downtrend of the feedstock contract price this month, sources said on Thursday.

Suppliers, who offered slightly higher prices in March, had to agree bigger reductions with their customers to balance out the difference.

Several sources are aligned that the average reduction of April will eventually be equal to the monthly styrene drop.

Looking at the styrene backwardation going into next month, EPS buyers might be possibly getting even better prices if they order now for May delivery.

Even though May styrene spot levels are not as low as they were almost two weeks ago, current values still suggest that another drop might be possible come barge contract time.

The styrene market moved higher this week with trades going above $1,400/tonne again due to ongoing delays in the restart of a European plant that has been under planned maintenance for several weeks.

Recent, but short-lived, unplanned production problems in the region also created some availability constraints in the market and this also pushed the numbers up.

Even though the styrene market was not described as short, material might not be easy to find on a specific date.

Looking at EPS demand, volumes have so far been lower than expected for most of the key outlets.

The reasons for the order entry slow down seemed to vary.

On one hand, the styrene backwardation into May, with the likelihood of lower prices next month, made some players buy only the very essential and leave the rest when prices would go further down.

On the other hand, the softer styrene trend might not be related to the slower EPS offtake, but maybe this was more linked with political and economic uncertainty in some European countries such as Italy.

A third reason might as well be that recent bad weather conditions as well as the Easter holidays have impacted April business and maybe order books will look busier in the second half of the month.

Meanwhile, volumes in the polyurethane (PU) market seemed to be increasing, as opposed to past months when supply was rather tight and EPS registered additional demand as a result.

On a year-on-year basis, April EPS demand has been 10-15% lower so far. It is unclear if this percentage will improve or it will get worse in the next two weeks.

According to some estimates, if styrene spot remains under pressure going into May, April EPS volumes will most likely be pushed further down.

On the availability front, the market echoed no particular concerns, although a few sources mentioned some sort of tightness related to packaging grade.

Pictured: EPS insulation being fitted in the UK
Source: Graham Harries/REX/Shutterstock

Focus article by Vasiliki Parapouli