PS Prices Head Higher in August

North American polystyrene prices saw their first decline of the year in July, as the sharp drop in benzene costs worked through the styrene chain. Townsend’s survey revealed lower prices for both Crystal and HIPS grades.

But the market could be heading in the opposite direction in August. Feedstock benzene prices moved higher amid crude volatility the latter half of July and remain rangebound at higher levels in early August. Spot prices for PS, both domestic and export, are also being observed ticking higher. For PS producers, the renewed strength in feedstock costs provides a clear reason to push for higher resin prices, and producers have nominated as much as an 11.0 cpp increase for August PS contracts.

North American polystyrene prices typically track a cost pass-through ratio where a 10.0 cent per gallon shift in benzene feedstock translates roughly to a 1.0 cent per pound (cpp) adjustment in resin pricing. Currently, aside from any other contributing dynamics such as supply and demand, PS has the potential to move as much as 9.0 cpp higher in August based on the increase in the August benzene contract price. Because the US benzene contract price is forward-looking – meaning the August contract price is negotiated and finalized at the very end of July – the 10-day pricing window is back-dated from the end of the month. So, any surge in spot prices during the last two weeks before a month rolls over can have a disproportionate effect on the next month’s feedstock costs. If you would like more information on how this factors into PS pricing, shoot our analysts a quick email at customercare@townsendsolutions.com. We’ll be happy to answer any questions you have or just discuss the market.

The challenge is demand. PS demand into packaging and consumer goods remain sluggish, while building and construction offers some support. Polystyrene operating rates also remain relatively low, and the market still has excess supply despite recent capacity reductions.

In other words, producers are facing higher production costs without a strong demand environment to support price increases. August could therefore be an important test for PS pricing. Surging feedstock costs have given producers a reason to seek higher prices, but the key question is how much of that increase will buyers accept, particularly after getting some relief in July.

Interested in keeping up with plastic market prices and trends? Plastic Market Monthly provides monthly North American price benchmarks for HDPE, LDPE, LLDPE, PET, PP, PS, and PVC. Contact us for more information or to request a complimentary edition.

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