Styrolution targets NWE PS margin expansion despite decrease in feedstock and ample supply

04-Sep-14

Germany-headquartered Styrolution will target a margin expansion in its September European polystyrene contract prices, despite a decrease in feedstock costs and ample supply, as per Platts. The company said on its website that it would reduce general purpose PS contract prices by Eur35/mt from September 1 from its August settlements, despite a Eur50/mt reduction in the styrene contract price to Eur1390/mt FOB ARA (US$1827/mt), contract negotiating parties confirmed Tuesday. Styron said it would maintain its high impact premium over GPPS at Eur90/mt. Both styrene and butadiene feedstock costs have been cut for September. The key styrene settlement was confirmed on Monday by sources from Synthomer, Shell, Total and Ineos Styrenics. The decline was prompted by a fall in ethyl-benzene costs for September, CP sources said. However, sources later added that the lower CP in September reflected weak demand from the polystyrene and expandable polystyrene sectors, going into the building and construction industry. But some optimism remained that market conditions in September could improve as regional supplies tighten on plant maintenances and expected lower volumes of imports from the US Gulf. In the derivative polystyrene market, oversupply was exacerbated by import penetration from Egyptian, South Korean and Russian supply. With a lack of supply interruptions seen in June and July, and demand seasonally low in August, converters and distributors were able to pressure suppliers to accept reductions. Producers reported that they had to accept decreases of up to Eur20/mt in August, while consumers said that they were not able to get more. "The market in Germany...is not very good at the moment and the expectations are low and so we will see (for September)," a polystyrene converter said last week. Another said that demand was so weak that he expected it to continue: "I would think that it has to continue into September. Prices are too high." The weak sentiment was confirmed by a producer who said last week: "From my point of view, August is weaker than expected." Sources pointed to the influence of imports not only from Egypt and Russia but also from South Korea, where production costs were lower. "Where I would be able to to sell [HIPS] at GBP1,320 (around US$2180) we have lost out to [South Korean] business at GBP1250/mt," the trader added.