Local HIPS carries large premium over GPPS in Italy

12-May-11

HIPS, in Italy’s local market has been trading at a high premium when compared to GPPS for some time. The relative strength of the HIPS market mainly stems from lack of butadiene feedstock and higher upstream costs. In Europe, the May butadiene contract was settled with a significant increase of €360/ton from April due to an ongoing supply shortage in the region as a result of planned and unplanned production outages at several major producers including Sabic, Dow and LyondellBasell. Because of the ongoing production issues across the region, spot butadiene trade in Europe was also extremely strong over the past week as the lack of material left many producers without offers, according to market sources who continue to report that there is no improvement in availability yet, despite the return of one of the producers. “European sellers are pushing for further increases in HIPS prices,” a packaging producer commented this week while European producers also confirmed that this month they are asking for a large premium ranging between €80/ and €120/ton for HIPS over GPPS due to tight availability for this product. “HIPS is seeing relatively better demand compared to GPPS but HIPS supply is tight due to the butadiene shortage and higher costs,” a distributor noted while another local seller, who has no HIPS stocks for now, said he would offer HIPS with a €100/ton premium over GPPS due to higher butadiene costs although the overall PS demand is slow. Following a round of decreases in April, European PS producers came with higher initial prices to Italy this month due to an average increase of €34/ton in May styrene contracts. Spot offers so far mostly indicate increases of €10-40/ton over April, with €20-35/ton increases already passing.