A confluence of lackluster construction demand and stiff competition from Asian supplies have kept price gains in the Northwest European expandable polystyrene market at bay, according to market participants.
The NWE EPS market had been depressed from the beginning of winter in December, due to a sharp fall in weather-related demand.
Over 90% of EPS demand comes from the construction sector. EPS applications are used in the building of roads, bridges, railway lines, and in thermal insulation foams and packaging. And typically, building season starts in the second quarter in Spring.
But as weather conditions have improved, the improvement in demand industry observers expected to see has yet to materialize.
No revival in the construction sector is in sight, while typically by this time of the year, end users would be buying in advance or re-stocking to prepare for increased order volumes, market participants said.
"The construction period has not begun yet and there is a lot of impact from Asian countries too," said an EPS producer Wednesday.
Offers from Chinese and South Korean EPS manufacturers were placed at $1,830-1,840/mt CFR Turkey/Russia/NWE -- $280/mt lower than the Eur1,590/mt ($2,115/mt), several sources said, and Asian suppliers were becoming increasingly aggressive with offers into the European region.
WEAK CONSTRUCTION DATA
Market players were concerned that Asian supplies would increasingly displace European product going forward as they wind down trade with their largest demand outlet -- Iran.
Chinese customs data showed that in February, China's EPS exports declined 16.2% month-on-month to 24,159 mt, as sales to Iran slumped 51.8% to 6,435 mt amid escalating political tensions and intensifying trade sanctions.
After Iran, the second-largest buyer of China's EPS was Russia, followed by Brazil.
Thus far this year, EPS prices have lagged the rise in general purpose polystyrene. From the beginning of February, EPS prices rose Eur105/mt to Eur1,590/mt FD NWE while GPPS prices increased Eur130/mt to Eur1,455/mt FD NWE.
Major EPS producers like Sunpor and Styron were also only beginning to bring their facilities back online from scheduled maintenance at the end of March.
Market sources say that the outlook for this year's building season is poised to remain lackluster, based on weak construction data thus far this year.
According to Eurostat, construction output in the European Union softened in January by 1% year-on-year on the back of sluggish activity in the UK and southern parts of Europe. Against December, output decreased -- on a seasonally adjusted basis -- by 4.1% in the EU to its lowest in more than a year.
Among major markets, construction output weakened 2.3% in the UK, the EU's biggest construction market, and dropped 11.5% in Spain. French output eased 0.5%, and Italian activity plummeted 10.9%, while German construction output firmed 6.5%.
