Suppliers firm on price hike despite feedstock volatility
Producers in the North America expandable polystyrene (EPS) market remained firm on plans for mid-August and 1 September price increases despite recent volatility in feedstock prices, sources said in the week ended 9 August.
Spot prices for feedstock benzene fell from nearly $4.40/gal last week to below $4.00/gal this week, following plunging crude oil prices. Suppliers, however, suggested the fall was an overreaction and said prices were likely to trend back up again.
Regardless, suppliers said an EPS price increase is necessary because of the 44 cent/gal increase in August benzene contracts over July contract prices.
US producers BASF and Nova Chemicals have each announced a price increase of 3 cents/lb ($66/tonne, €46/tonne) for non-modified or package EPS and a 5 cent/lb increase for modified EPS, which contains a flame retardant. The BASF increase is set to go into effect on 15 August, while the NOVA increase is set for 1 September.
Flint Hills Resources announced an increase of 5 cents/lb for all grades of EPS, regardless of whether it contains the flame retardant, sources said.
Buyers have suggested the recent volatility in the feedstock prices could provide some room for price negotiations.
One buyer said demand is not great, adding suppliers have called who are very eager to ship product.
The buyer said it has plenty of material on hand and has no intention of supporting the price increase.
Producers described August demand as strong, and suggested the beginning of September could be equally as strong.
However, concerns about the US economy could have some negative effect on downstream demand, sources said.
In the key construction market, employment increased by 8,000 jobs to a 15-month high in July, according to an analysis of federal employment data by the Associated General Contractors of America.
The industry unemployment rate fell from 17.3% in July 2010 to 13.6% in July 2011, and the number of unemployed who had previously worked in the construction sector fell by nearly 400,000, the association said.
However, association officials predicted that poor outlook for public sector construction might serve as a drag on the expanding private sector construction segment.
In Mexico, producer Polioles announced a 2 cent/lb price increase for all grades of EPS effective on 1 September, according to a letter sent to customers on Tuesday.
The proposed price hike is in addition to increases of 3 cents/lb for non-modified EPS and 5 cents/lb for modified EPS, that had been nominated for 15 August.
The letter stated the increase is necessary because of rising material costs, including recent increases in benzene and styrene monomer.
Buyers have expressed scepticism that producers will achieve the entire increase, based on weak downstream markets and recent volatility in feedstock prices.
A producer suggested that even if benzene and styrene falls, suppliers will push hard for the increases to make up for poor margins.
In Europe, the market was described as uncertain in the wake of a substantial hike in styrene monomer (SM) prices. While participants had been expecting an increase in monomer costs, they were not expecting such a significant increase. Sellers and buyers questioned how much could be passed on to converters.
In Asia, EPS prices rose in line with higher feedstock SM costs. EPS suppliers hiked offers to maintain workable margins, while buyers were surprised by the price increase. Deteriorating economic conditions in the US and the eurozone are worrying the market. EPS producers are operating at around 65% capacity, largely unchanged from last week.
Feedstocks
Crude oil futures extended recent losses in response to the worsening global economic outlook while tracking the stock market back into negative territory. September WTI traded at $79.30/bbl, down significantly from $93.79/bbl recorded on the previous Tuesday.
US August benzene prices were discussed at $3.95–4.05/gal on Tuesday, slightly higher than the previous session.
US ethylene for August traded at 62.375 cents/lb on Tuesday, down from deals down at 62.500–63.125 cents/lb on Monday.
US August styrene prices were at 67.25–68.25 cents/lb, at the same level since 5 August.
($1 = €0.70)
This week on ICIS ( www.icis.com ):
09/08/2011 12:08 Asia chemical shares pare down losses, recession fears persist
09/08/2011 05:18 Asia styrene down by $70/tonne on sharp drop in energy futures
08/08/2011 23:14 US spot benzene offered below $4.00/gal on weaker energy futures
08/08/2011 22:28 Interview: cheap feedstock to deliver US chems from market turmoil
05/08/2011 21:19 Initial US July styrene contracts are steady to 4 cents/lb lower
