Huntsman Corp.'s move to split out and reduce a 4 cent price increase on polystyrene resin has blunted competing efforts to get similar increases across to buyers, according to several resin makers and users contacted last week.
There is still some dissent on the success or failure of the initial increases, which were scheduled to hit buyers in the first two weeks of August. But buyers and sellers agree Huntsman's Aug. 18 move to reduce the increase on high-impact PS and eliminate it entirely for crystal PS is affecting the market.
But responsibility for the failed increase should not rest solely on Huntsman's shoulders, said Bill Brengel, Huntsman's PS marketing director.
``It's not just this move, it's the marketplace itself,'' Brengel said. ``We have poor market fundamentals to support a price increase right now.''
Huntsman of Salt Lake City confirmed the HIPS increase was reduced to 2 cents. Brengel said Huntsman had received price information from customers that other PS makers were not committed to the 4 cent increases.
``We saw some very alarming market moves by our competitors, so we decided to play a leadership role,'' Brengel said. ``We didn't want to sit by and let our market share slip away.''
Huntsman treated the high-impact and crystal grades differently because of separate supply conditions in each grade.
``There's a large amount of crystal available from secondary channels such as brokers, but there's less of that on the impact side,'' Brengel said.
Dow Chemical of Midland, Mich., Fina Oil Co. of Houston and BASF Corp. of Mount Olive, N.J., confirmed they took the same step shortly after Huntsman. Industry sources said Nova Chemical Co. of Calgary, Alberta, has pushed its 4 cent increase back to September. BASF will continue to seek a 4 cent price increase for flame-retardant PS grades.
Those companies, along with Chevron Corp. of Houston, had announced price increases because of shrinking margins and rising styrene monomer costs.
Huntsman's move ``destabilizes the market'' according to one industry executive. ``I've never seen an increase split between high-impact and crystal before. That makes it very difficult to explain the increase in the marketplace.''
BASF PS product manager David Arneson labeled Huntsman's decision ``a brainless move'' that will make it difficult for PS makers to increase prices for the rest of the year.
``We had to make the move to avoid losing business to Huntsman, but this is very disappointing to everybody in the polystyrene business,'' Arneson said in an Aug. 27 telephone interview from Mount Olive. ``To make a move like this means the whole industry will pay for it long-term.''
Huntsman's change was not necessary, according to Bob Koaches, Dow's PS product manager.
``From what we heard and saw on our order books, people were accepting the 4 cent increase,'' Koaches said.
Jean Meador, a PS market analyst with Phillip Townsend Associates Inc. of Houston, said Huntsman's action was the result of new production capacity.
``Huntsman sees the competition out there and they're taking a stance that they're not going to lose any of their market share,'' Meador said. ``But their competition is probably pretty upset because they had been holding pretty tough on the increase.''
Claims of early success on the 4 cent increases were not backed up by buyers, most of whom had seen little or no increase.
A major Pennsylvania-based PS buyer said he had seen none of the increase, which he described as ``too much, too early.''
``You don't put out a price increase in the doldrums of summer without supply and demand or a cost-push phenomenon working in your favor,'' the buyer said. ``And none of those things happened.''
Buyers in New York, Illinois, Ohio and Ontario also reported the increase had not gone through. Several buyers contacted pointed to capacity expansions — such as Chevron's expansion in Marietta, Ohio, and BASF's new styrenic copolymer works in Altamira, Mexico — as factors that hurt the increase's chances.