Demand, feedstock costs raise spot market tags
By Staff -- Purchasing, 1/13/2000
Strong demand, both domestically and abroad, coupled with tight supplies and rising feedstock costs, have placed upward pressure on styrene spot prices, say analysts."Spot-market styrene prices have soared," observes Earl H. Simpson, a petrochemicals analyst with PACE Consultants in Houston, Texas. According to PACE data, spot prices are currently in the vicinity of 30¢/lb, representing an approximate 5¢/lb gain since January 1999.
Producers nominated a 3¢/lb increase for styrene monomer in September, followed by another 3¢-4¢/lb increase for October. Although the increases are not fully settled, it appears that producers have achieved 2.5¢-3¢/lb increases, according to PACE.
"We've seen some price increase proposals," says Larry Burns, materials manager at Morton International, Lansing, Ill. "Our prices came up about 1¢/lb in October, but we've been able to fend off other increases since July," he says.
Contract prices for styrene monomer averaged 27¢/lb in fourth quarter 1999, according to data from buyers responding to PURCHASING's monthly chemicals price survey. Spot tags are slightly higher, averaging about 29¢/lb. In first quarter 2000, buyers expect prices to go up to around 31¢/lb for contracts and 33¢/lb for spot. Once prices reach the low-30¢/lb range, buyers think they'll flatten through third quarter and soften somewhat in the fourth quarter to 27¢/lb (contract) and about 30¢/lb (spot).
Burns of Morton disagrees with this outlook, suggesting that "Demand is not as high as producers say it is, and feedstock costs have not escalated as much as they say." Burns doubts that producers will be able to sustain any increases they may obtain during first quarter 2000. He says producers currently have an increase of about 2.5¢/lb on the table for January, but estimates that prices will rise only a penny if they rise at all. "If [producers] get a price increase now, we'll likely get much of it back in March and April," he says.
PACE data places current styrene contract prices at about 28¢/lb. PACE predicts that feedstock costs and tight availability will push contract prices up to about $30/lb in the next few months and says prices will stay at that level through first-half 2000. According to PACE, industry operating rates are currently between 91%-92% and domestic production of styrene monomer totals 2.8 billion lb/yr while the market is consuming about 2.6 billion lb annually.
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