September outlook for polystyrene falters in Europe

August styrene contracts settled with an average increase of €125/ton in Europe, pushing regional sellers to seek sizeable increases in PS prices, as per Chemorbis. A major producer claims to have achieved initial hike targets of €100-120/ton in settlements for their gentlemen's agreements in Italy, while buyers continue to wait to close deals on hopes of paying relatively smaller increases. The spot market in Italy has also gained by similar amounts with players reporting €100-120/ton increases in done deals month over month. Nevertheless, this bullish atmosphere has started to falter as September draws nearer. The main reason behind the emerging softening is the drastic drops in feedstock costs. Contrary to August, September styrene contracts are expected to post a lower outcome since crude oil prices have fallen by almost US$10/barrel while spot benzene prices lost US$100-110/ton (€69-76/ton). Spot styrene, which has been volatile recently and has pared some early losses, is still trading US$70/ton (€48/ton) below the early-August level. Even when lower costs are put aside, the persistent economic turmoil continues to weigh down on expectations of reviving demand for the near term in Europe. Few players are optimistic that September will be any better than August, a month in which many converters were idled due to summer holidays. This situation gives an upper hand to buyers in their negotiations with their suppliers in order to pay smaller increases for August or even resist price hikes for next month. Finding support from this situation, some Italian buyers are not even showing interest in the import cargoes that have lately shown up at competitive prices when compared to the local spot market in anticipation of prices matching their buy ideas from their regular suppliers. A source from a West European producer has also admitted that €30-50/ton decreases in PS prices looks very probable for next month considering the current feedstock costs. There are several large shutdowns planned ahead both for styrene and PS. Ineos Nova is planning a 10 day shutdown at its 190,000 tpa PS plant and 300,000 tpa styrene plant in Germany in September while Styrolution and LyondellBasell have already been running their styrene plants at lower rates in August with respective capacities of 500,000 tpa and 640,000 tpa in Belgium and the Netherlands. Apart from these, Styron, Total and Shell Chemical/BASF are also planning shutdowns at their styrene facilities across Europe in Q3 and Q4 although details are not disclosed yet. Accordingly, tightening supplies are likely to counterbalance the losses of the upstream chain, in some sellers' opinion, helping them to hold their relatively firm stance.