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PS: Polystyrene Demand Is Up, But Prices Fall

May 28, 2020
Buyers were firm to keep prices in line with costs.

London – Polystyrene demand was up in May, but prices still fell. Buyers were firm to secure lower prices.

In the past few months polystyrene avoided a sharp decrease in demand. While total demand decreased substantially for many polymers, polystyrene seems to have weathered the storm.

During the pandemic, oil prices fell sharply and dragged down raw material costs in April.

However, polystyrene prices did not fall by the same amount. Most likely, this was because of the good demand polystyrene was enjoying at the time. But in May buyers wanted to share the benefit of lower costs. As such they are firm to stop sellers increase margins further.

Background

Polystyrene is used for many applications. But the major one is packaging. Food packaging is especially important.

When countries locked down and people stayed at home, demand surged for deliveries. This includes food and other items. As a result demand for polystyrene went up for some segments. What is more, at the time, because of uncertainty, businesses and households were increasing stocks. This increased demand even further.

However, polystyrene demand in some sectors did slow down because of the slowdown in economic activity caused by the pandemic. For example, demand from construction and office equipment decreased. Demand for drinking cups in vending machines was also down. Furthermore, even packaging of non-essentials suffered.

However, demand for polystyrene in May increased also because buyers speculated that prices reached the bottom and are likely to increase soon.

But despite the good demand, sellers were not able to prevent the slight decrease in prices. In May, prices decreased €10/mt. Most buyers were firm to get some decreases. This is because margins posted big increased in April. And sellers sellers did not pass on the full cost decrease.

There is also another reason that may explain this. While demand is relatively strong, some market segments are still not doing well. And this is weakening total demand.

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