Market and product

Following the €35/tonne increase in the December styrene barge contract price, producers in the European expandable polystyrene (EPS) market have announced higher pricing targets on the back of healthy demand and supply constraints, sources said on Monday.

Several EPS players have also stressed the need for some margin recovery given the high cost of styrene throughout 2015. One supplier said that it was currently targeting increases as high as €60/tonne this month amid strong demand.

“The warm weather has helped,” the supplier added.

“There are still leaves on the trees. We are sold out for December, and customers are stockpiling for January.”

Another producer said it had agreed December volumes quickly last week at an increase of €35/tonne in line with the styrene barge contract. The producer added that there was some emerging tightness due to one EPS producer going into turnaround by mid-December, which could see prices move even higher.

As the year draws to a close, there are expectations that the current floor on pricing in the aromatics chain has been reached. Some players anticipate further price increases on styrene in January, which is leading to customers pre-buying now.

The spread of styrene over benzene has now settled at a reasonable level (see graph), and this is also supporting some consumption throughout the styrenics chain as buyers see some stability in the market.

One EPS seller was less sanguine for December, feeling that demand was slowing down already ahead of the Christmas holidays.

However, the seller said it was likely to achieve a full pass-through of the €35/tonne styrene increase this month, and expects to see an upturn in EPS consumption by January 2016.

“There is definitely some pre-buying now as January traditionally sees prices go higher,” the seller said. “Styrene prices also seem low now looking at the spread over benzene.”

However, with the anticipated restart of the Moerdijk propylene oxide/styrene monomer (PO/SM) unit by January, other styrene players expect to see ample availability in the market by early next year.

The current surge in buying interest could also have a negative impact on demand in the New Year, one EPS producer said:

“December is usually a half-month with the holidays, but not this year. This could limit some of the upturn normally seen in January.”

If Asian styrene prices fail to recover in the coming weeks, this could also see US exports move into Europe by early 2016.

Nevertheless, previous years have seen an upturn in demand as players restock after the holiday season, while February has traditionally been a strong month ahead of the peak construction period ahead of the summer months.