European polystyrene converters expected the recent financial market malaise to temper any contract price increases in September, despite an expectation that feedstock costs would increase and that a number of converters would need to return to the market to replenish stocks.
In addition, a large portion of European styrene capacity, almost 2 million mt/year of name-plate capacity was expected to start scheduled maintenance in Q3 and Q4 and this could restrict styrene and thus polystyrene supply through till the end of the year.
In August, most PS sources agree that although polystyrene demand was seen as much improved over July, September is not expected to be much better, according to some market sources.
"August was not bad, July was a dead loss but some sort of normality returned in August. I don't think that September will be great," a styrene trader said, commenting on the styrenics chain.
One large converter said that he had not seen an August as quiet for a number of years. Commenting on the expectations for the European economy and how this will impact demand, he said that further down the chain, the impact is already being felt.
"I can't see people loosening their belts. Packaging is more resilient than other segments. Volumes are staying but that is because they are stimulated by sales promotions. You still have to eat, whether it's a premium brand of not," he said. The source referred to premium brand dairy producers, such as Danone or Muller having to boost promotions to stay competitive.
So far in August, PS sources have confirmed accepting net contract price increases of up to Eur85/mt ($123/mt], to Eur1,365/mt FD NWE, but still below the styrene monomer feedstock costs increases of Eur125.33/mt in July, according to Platts data.
"In August there were reasons for [either] an increase or a decrease. It could go either way due to macroeconomic reasons. I expect crude to increase due to Libya and looking at the market, 14% of styrene production will be down," a distributor estimated.
Some sources said that with the macro-economic picture uncertain beyond September and a number of major global economies registering stalled economic growth rates in the second quarter, and with it suggestions that a recession was on its way, large converters could have convincing reasons for resisting producer increases, according to the distributor.
"If they have to wait until September 15, one of the producers may be tempted to lower prices," the distributor said.
This was because most of the large buyers took advantage of the weak demand and lowest 2011 prices in July to buy more product.
In addition, producers were willing to accept lower price settlements in order to offload stock.
"It could be that the large customers can wait. Large customers who have [spare cash] and stock capacity will do that," the distributor said.
