Asian PS sellers maintaining firm stance after last week's upstream reversal

Asian PS sellers have held firm on their prices recently in spite of the significant declines witnessed in upstream markets late last week.  Regional producers brushed off the slump in upstream costs late last week, predicting that these drops would be only temporary while electing to leave their prices unchanged after PS prices had risen along with styrene feedstock costs earlier in the week.

From Wednesday to Friday of last week, crude oil futures on the NYMEX lost a combined total of $12.06/barrel to end the week at $97.18/barrel, the lowest settlement seen since the middle of March.  This period of steep losses included a $9.44/barrel fall on Thursday which was the largest single day decline since April of 2009.  The sudden drop in oil prices was part of a broader commodity sell-off touched off by weaker than expected economic data from the US and Germany which suggested that the economy is not recovering as rapidly as investors had previously hoped.  The steep drop off in crude oil prices also pulled down Asian naphtha prices, with spot naphtha prices losing more than $100/ton on Friday to settle below the $1000/ton mark on a CFR Japan basis for the first time since April 1 of this year.  Declining prices in the energy complex along with softer benzene costs pushed spot styrene prices on an FOB Korea basis $60/ton lower on Friday, erasing some early week gains in styrene prices.

PS sellers in Asia were not rattled by these sudden drops in upstream costs, however, with most producers and traders keeping their prices steady or even asking for higher prices.  A Hong Kong producer stated that they managed to sell some material at prices equal to their offer levels from last week after announcing a $10/ton increase on their prices last Friday.  The producer acknowledged that their sales had been affected by the downward slide in upstream costs, although they kept their prices firm as they believe that last week's upstream cost declines will prove to be a temporary phenomenon.  Inside China, distributors and domestic producers lifted their prices by around CNY100-200/ton ($15-31/ton) over the past two days.
 
Producers and distributors commented that they expect to see a temporary drop in sales volume but that the losses in upstream costs will not prove to be permanent.  Sellers added that they are feeling satisfied with the number of price inquiries they have received recently.

Sellers in Southeast Asia also maintained a firm stance on their prices last week in spite of the late week slippage in upstream costs.  Distributors in Indonesia lifted their prices to the local market by $20-55/ton for GPPS and by $70-120/ton for HIPS last week on the strength of limited availability inside the country, with distributors expressing confidence in their ability to conclude deals at their new price levels.  Traders active in the region reported receiving increases of $20-55/ton from Thai and Taiwanese producers, with most traders lifting their own prices by similar amounts in order to offset their higher replacement costs.  Traders commented that demand remained essentially unchanged over the past week while predicting that PS prices would not witness any major price changes over the short term.

Sellers' predictions that the drop in upstream costs seen last week would prove only temporary has already been partially vindicated.  Spot styrene prices on an FOB Korea basis gained approximately $25/ton on Monday as the styrene feedstock market began to show some signs of stabilizing following last week's drops.  However, players commented that they are not expecting spot prices to move back up to their highest levels from last week over the next few days.