Released on 03/01/13

The 2013 price outlook  for polystyrene (PS) in the Middle East is bearish because feedstock  styrene monomer (SM) costs are expected to remain high and affect the  downstream demand, said producers.

SM prices, which rose to highs of above  $1,710/tonne (€1,299/tonne) CFR (cost & freight) China in December  2012, are forecast to remain firm in the coming year, owing to high  upstream benzene costs, according to market sources.

PS prices rose in tandem with feedstock costs,  with general-purpose PS (GPPS) prices rising by $10-45/tonne week on  week in the Middle East and south Asian markets, ICIS data showed on 21  December.

“2013 is likely to be a gloomy year [for PS],  overshadowed by high SM prices,” said a northeast Asian producer and  exporter of PS.

The demand for PS is likely to remain largely  stable over the year, but high PS prices, as a consequence of rising SM  costs, are expected to deter end-users from making bulk purchases.

In the Middle East, demand for PS from the  downstream food and beverage packaging sector traditionally picks up in  January, after the winter season.

However, many producers are uncertain about the  extent of the recovery in demand in 2013 since they plan to raise their  PS offers in response to the higher monomer costs.

The region, which sources the bulk of its PS  requirements from Asia, showed much resistance to the higher offers in  October-December 2012.

“It is difficult to absorb higher prices,  because prices in the downstream markets have not risen at a similar  pace, and it has become very difficult to pass on the price increase to  end-customers in competitive markets,” added a regional PS importer.

Producers expect the buyer resistance to  continue in 2013 because they are looking to hike their offers further  to improve their margins, which are currently in negative territory.

PS producers’ offers for general purpose PS (GPPS) were at $1,875-1,925/tonne CFR Middle East and high-impact PS (HIPS) offers were at $1,950-2,000/tonne CFR Middle East on 21 December, according to ICIS data.

These offers were on par or below producers’  manufacturing cost of the polymer, as feedstock SM prices were hovering  at above $1,700/tonne CFR China in December, according to market  participants.

A conversion cost of about $100/tonne is  involved in the manufacture of GPPS from PS. The manufacture of HIPS  involves an additional cost of $150-200/tonne over that of GPPS.

Adding to that is the freight element, which  varies between $70/tonne and $90/tonne, depending on the region that the  cargo is scheduled for.

Demand in the Middle East is thus largely  expected to be for covering the immediate needs of buyers, who are  unlikely to hold significant volumes in their inventories.

($1 = €0.76)

Source ICIS News