Asian polystyrene producers reduce run rates amid high feedstock costs, lackluster demand

27-May-15

High feedstock costs and lackluster demand have narrowed production margins to below breakeven for polystyrene producers across Asia, prompting most producers to cut operation rates, as per market sources in Platts. Production margins for PS producers have mostly fallen to below breakeven levels since early March, following a supply-driven surge in feedstock styrene monomer prices. As of May 20, margins for general purpose polystyrene and high impact polystyrene were both US$10/mt below breakeven, based on the latest weekly assessments of GPPS and HIPS markers at US$1510/mt CFR China and US$1550/mt CFR China, respectively. CFR China SM was assessed at US$1420/mt. PS prices need to be US$100-140/mt above feedstock SM for producers to break even. Thin production margins have pushed Japan's Denki Kagaku Kogyo, better known as Denka, to run its 200,000 tpa GPPS plant in Singapore at 70-80% capacity since last month, from 90% previously. In South Korea, Hyundai Engineering Plastics has recently cut runs at its 120,000 m tpa PS plant at Ulsan, a source close to the company said, noting that "Hyundai EP has been running at full capacity since 2010 and never reduced the rate." The source however, did not give the new operation rate of the PS unit. Runs at Asia's largest PS producer China have also fallen, to an average of around 40% capacity in May, from 60-70% in April, with producers hit by weaker demand, according to a China-based market source. Some producers in southern China are now selling feedstock SM instead of PS, the same source added. China has 2.3 million mt/year of PS production capacity. Demand for PS has slowed, as end-users sought out more acrylonitrile-butadiene styrene given the narrowing spread between ABS and HIPS prices -- making ABS a relatively cheaper option than HIPS, sources said.