Europe PS market tightness expected to continue amid concerns over rising upstream costs, Brexit

LONDON (ICIS)–Tight fundamentals are expected to continue into March in the European polystyrene (PS) market amid ongoing pre-buying activity and fears that a no deal Brexit could impede logistics and disrupt supply chains.

– Converters struggle to obtain volumes as supply squeeze worsens

– Pre-buying and Brexit preparations see demand surge by around 40%

– Firmer prices expected for front-months amid tight fundamentals, upward styrene spot trend

Many participants continue to anticipate a rise in upstream styrene monomer costs into March and April due to firmer front-month spot trends in that market.

While some players expect low double-digit rises, others anticipate mid-level double-digit increases in March and potentially higher in April due to a heavy turnaround schedule in that market.

As a result of this, many converters have been engaging in pre-buying activity and the market has tightened considerably.

According to one source, demand for raw material has increased by around 40% this month, making it hard for producers to keep up with orders and many having sold out earlier in the month.

“We are having a very difficult month in terms of deliveries and cancellations, leading to huge problems with serving our market and clients,” a buyer commented,

“This will continue into March … We are only receiving around 75% of our regular average monthly steady volume that we require,” it added.

BREXIT LOOMS
Tightening fundamentals have been compounded by the looming exit of the UK from the EU, which is set to take place in late March.

Converters based in the UK started stocking up on material in recent weeks over concerns that logistical issues could delay shipments and disrupt supply chains in the market.

Adding to this, sources have been mentioning throughout February one producer having technical issues with one of its plants and being unable to supply general purpose polystyrene (GPPS) grade material, although this could not be confirmed at the time of writing.

Lower prices compared to much of last year has also buoyed buying appetite, with prices in Europe competitive versus other regions such as Asia.

Therefore, fewer imports are expected to arrive although higher costs in the front-months and reduced availability could incentivise buyers to look outside the domestic market in the weeks to come.

For 2018, imports of PS into the EU fell by almost 10% versus 2017. With most of the material arriving from four markets (South Korea, Iran, Russia and India), it remains unclear whether this will continue into 2019.

If styrene monomer costs rise as much as some players anticipate next month, and April spot styrene trading stays in contango with March, demand is likely to remain strong from ongoing pre-buying activity and supply could shorten further, potentially leading to higher PS prices.

–
General purpose polystyrene (PS) is used in food packaging, disposable utensils, cutleries and various other consumer items. High impact PS is used in consumer electronics and toys while extruded PS is used in the construction industry as insulation.

Pictured: A house being built using expandable polystyrene (EPS) for isolation purposes
Source: Imagine China/REX/Shutterstock

Focus article by Ciaran Tyler