Polystyrene markets in Europe and Asia supported by costs

Polystyrene markets in Europe and Asia are supported by higher upstream costs despite globally sluggish overall PS demand at the end of 2011, as per ChemOrbis. Climbing costs of production are causing producers to raise prices. In Asia, spot butadiene prices have recorded further increases during the past week on FOB Korea basis as spot prices jumped up by US$300/ton. With this recent increase, spot butadiene prices are now US$1100/ton higher when compared to the levels reported in late November. The reduced cracker operating rates have fueled these hikes. Meanwhile, spot styrene costs are US$40/ton higher when compared to the levels reported at the beginning of December with spot benzene values climbing up by US$75/ton during the same period on FOB Korea basis. Ethylene costs also gained US$45/ton on CFR Northeast Asia basis. Tight supplies in the Northeast pulled spot ethylene prices up despite discouraging demand at the end of the year. In Europe, January butadiene contracts settled with increases of €50/ton (US$65/ton) over December. Although the regions had comfortable domestic supplies, strong demand coming from Asia, where spot butadiene price skyrocketed, fueled the increase on European butadiene contract prices. Styrene contracts are still awaited to settle at the time of publishing. However, higher spot styrene values, which are up by US$45/ton since the beginning of the month, signal for a higher settlement for January. Meanwhile, spot benzene values recorded increases of US$180/ton from early December levels and ethylene contracts also settled higher for January, as per ChemOrbis. Now, the ethylene contract is €40/ton firmer (US$52/ton) while producers were initially targeting larger hikes on the back of their higher feedstock costs and poor margins. Looking at the crude oil costs, prices were nearing US$100/bbl in H1-December, after which they retreated to 5 week low levels, below US$95 and have nearly reached the US$100/bbl mark again. PS producers are facing higher production costs although the still sluggish demand is likely to prevent any major hike attempts on polymer prices. In China, spot GPPS prices were reported mostly stable during this past week while HIPS prices gained US$20/ton at the low end of the range. As the year 2011 wears off, there are no major changes expected on prices but the January outlook is stable to firmer on the back of the firm upstream costs. Meanwhile, a West European supplier is reported to be already targeting a €150/ton hike for January. However, the weak outlook in European economies will likely put a cap on this increase amount.