North American polystyrene resin prices trended down slightly in June and July, but could be headed up in a big way in August.
Regional prices for high-impact PS fell an average of 5 cents per pound in June and July combined, while prices for general-purpose -- or crystal -- PS slipped an average of 3 cents, according to buyers and market watchers contacted recently by Plastics News. The HIPS decline was greater because of swings in price for butadiene feedstock, sources said.
Those drops came as a bit of a surprise, especially since prices for benzene feedstock -- used to make styrene monomer -- climbed almost 5 percent between June and July, plastic injection mould makersettling at $4.30 per gallon. That trend typically would lead to higher PS prices.
The drops also come after PS makers were able to lift prices an average of 17 cents per pound -- about 16 percent, based on prices for injection molding grades of HIPS -- in the first five months of 2012.
North American PS demand, however, has remained low this year, falling about five percent through May, according to the American Chemistry Council in Washington. The food packaging and food service end market fared better than the overall PS market, with demand falling less than 3 percent in that time span. That end market accounted for almost 58 percent of regional PS demand in the first five months of the year.
But higher PS prices could be on the horizon for August, based on spot benzene prices that have spiked above $5 per gallon in recent weeks. That surge has prompted PS makers to announce price increases of 10 cents per pound effective Aug. 1.
Several market watchers told Plastics News that if benzene settled near $4.70 or $4.75 for August, there was a good chance that at least half of the 10-cent move on PS could stick.
“The piranhas are out for a swim,”plastic injection mould manufacturer said Wilf Kimball, a market analyst with The Plaza Group in Houston. “There’s really no reason for benzene to be that high. The paraxylene market’s not good, and that’s affecting benzene supply, but [benzene prices] still shouldn’t be that high.”
“I think [benzene] will settle below $5 for August,” he added.
A recent research note from the Resin Technology Inc. consulting firm also mentioned the paraxylene situation, and added that increased use of natural gas-based ethane feedstock might be playing a role in benzene tightness, since it produces less benzene than crude oil-based naphtha does.
Officials with RTI in Fort Worth, Texas, added that on-purpose benzene production “has been down, since benzene has been undervalued for quite some time.”
Benzene producers also may be “hanging on to material,”plastic injection mould maker since they already have low inventories and now see costs rising, according to David Barry, a market analyst with the PetroChem Wire consulting firm in Houston.
Barry agreed that a $5 price for benzene “isn’t sustainable.”
“It’s a puzzling situation that goes against the grain of what the markets thought would happen,” he said.