Polystyrene buyers might want to dig out a picture frame for this one: A price decrease letter from a major resin maker.
The rare move was made by Nova Chemicals Corp., which officially announced a 3 cent-per-pound decrease on prices for its commodity-grade solid polystyrene resins effective Jan. 1.
Officials with Pittsburgh-based Nova said the action was a result of market seasonality and short-term fluctuation in the price of feedstocks.
``There was a trend to pull down inventory at the end of the year all through the value chain,'' said John Siegrist, Nova's vice president of PS sales. ``There also was additional [pricing] softness late in the year for benzene and that impacted styrene monomer.''
Contract prices for benzene, a chemical feedstock needed to make styrene monomer, settled at $2.64 per gallon for January, a drop of about 18 percent from the December level. Spot prices for benzene had been above $4 earlier in the year.
Siegrist added that he expects PS demand and pricing to strengthen in the near-term. In the first week of January, spot benzene prices already had climbed as high as $2.95.
PS maker Total Petrochemicals of Houston announced a similar price decrease. PS product manager Jim Waguspak said the firm had been considering such a move when it learned that of Nova's action. Total began informing its customers of the price drop in late December, but did not issue a formal announcement as Nova did.
BASF Corp. of Florham Park, N.J., made no formal price decrease announcement, but PS marketing manager Michael Corwin confirmed that market prices have dropped 2-3 cents per pound in the last month.
``Benzene was in free fall after November because some additional [benzene] capacity came back on line,'' Corwin said. ``The [benzene] market is very thin so a capacity change of even 1 or 2 percent can have an effect. But prices already are recovering.''
Industry contacts said North America's two other commodity PS makers - Dow Chemical Co. and Chevron Phillips Chemical Co. LP - had announced similar price decreases. Officials at those firms could not be reached for comment.
Excluding the recent discount, PS buyers saw a torrent of price increases in 2004. PS makers announced 42 cents in increases for the year. Siegrist said Nova has implemented 34 cents of that amount and continues to work on the remaining 8 cents, even with the Jan. 1 price drop. Plastics News has reflected 30 cents of price increases in 2004 for solid PS on its resin pricing chart, reflecting data gathered from buyers and producers.
On injection molded grades of high-impact PS, the 2004 increases sent prices soaring a little more than 50 percent.
Even with the price increases taking hold in 2004, Waguspak said Total's PS business was not profitable until December.
``It's hard to imagine that even with all the increases going through, 2004 was still a sorry year,'' he said.
BASF's Corwin said his firm ``finally got ahead of the [margin] curve'' in the fourth quarter, but he added that the PS unit ``isn't near'' reinvestment levels.
North American PS demand enjoyed a healthy run in 2004, climbing almost 4 percent.
A good portion of growth was in expandable PS, where demand soared 11 percent through October, according to the American Plastics Council in Arlington, Va.