Premium between GPPS and HIPS widens in China

22-Aug-11

The premium between GPPS and HIPS prices has widened steadily over the past year In China, as per ChemOrbis. Higher HIPS production costs as well as relatively better demand for HIPS from the home appliances industry were cited as the main reasons for this rise. Outlook for the Asian PS markets currently signals for a softer trend as oil prices have lost over US$12/bbl when compared to the beginning of August. Glum news on the global economy, which bolstered fears of another global recession following the first ever downgrading of the United States government's credit rating, pulled down global stock markets towards the end of last week while also contributing to softer prices for crude oil and styrene feedstock. With pessimistic news weighing down on upstream markets, styrene costs, which increased US$205/ton from the beginning of July to the beginning of August, have lost nearly half of this gain from the beginning of August until now. Spot styrene prices on an FOB Korea basis have tumbled US$100/ton since the start of the month. Spot benzene prices on an FOB Korea basis have retreated by US$150/ton since the start of this month after rising US$195-200/ton during the July-August period. Spot butadiene prices had reached record high levels in July. Now, spot prices are US$130/ton lower on FOB Korea basis and US$200/ton lower on CFR China basis when compared to the first week of August. Although spot butadiene prices have lost noticeably due to lackluster downstream demand, they are still trading at very high levels and this fact continues to put pressure on HIPS producers. Rubber prices are also said to be high with some shutdowns in the region affecting rubber availability. South Korea's Kumho Petrochemical is planning to shut down synthetic rubber plants at Yeosu and Daesan for 18-day maintenance shutdowns in October. Shen Hua Chemical Industrial shut its 72,000 tpa synthetic rubber plant in Nantong on July 16, expected to restart on August 30. HIPS production costs remain relatively higher than GPPS costs even though butadiene feedstock costs have begun to come down off the record high levels recorded in July. This situation coupled with relatively better demand for HIPS led the premium for HIPS over GPPS to reach a whopping US$230-265/ton over the past few weeks.