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European styrenics participants challenge electricity surcharge

Highlights

Consumers, other producers dispute scale, need for charge

Electricity costs already transferred into spot/contract prices

European styrenics market participants were resisting the scale of recent electricity surcharges, with some labelling them as double accounting, following Trinseo's announcement last week that they would apply a surcharge of Eur200/mt on a range of styrenics products.

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A plastics converter challenged the need for a surcharge, arguing that the rise in electricity as well as other energy costs were already feeding through into spot prices.

"I don't agree with this, it is the end of quotations (indices) as it is because one will have a surcharge and one will not have a surcharge. it is like a Ryan Air model. One surcharge for this for that and another for something else. How did they come to Eur200/mt?," a plastics converter said.

The same converter argued that the rise in electricity was already being felt via higher spot and contract prices. Spot prices have increased to take this into account so adding a surcharge was profiteering, the converter said.

Feedstock European spot styrene prices have surged 22% since the start of October to be assessed at $1,561/mt FOB ARA, a five month high. In the week of October 18 so far, styrene spot prices have jumped by $141/mt, according to S&P Global Platts Oct. 21.

The plastics producer explained that in situations such as these where there are unforeseen events, like forces majeures and other market abnormalities, term supply contracts contain clauses to mitigate these market abnormalities

"They must advise you ...and you have the right to cancel that contract within 15 days of notification," the converter said.

Sources said that these surcharges were unfair given that those companies had not hedged their exposure to electricity costs and so were seeking to pass that cost on to consumers.

"We use a lot of electricity and we hedge our exposure," the converter said.

TRINSEO FOLLOWS OTHERS WITH SURCHARGE

US-headquartered plastics and synthetic rubber manufacturer Trinseo announced Oct. 15, specific utility surcharges for polycarbonate, polystyrene, acrylonitrile-butadiene-styrene, styrene-acrylonitrile and feedstock styrene monomer in Europe.

The surcharges, which will be implemented from Nov. 1 are Eur200/mt for styrene monomer, Styron-brand polystyrene, Magnum-brand ABS and Tyril-brand SAN, and Eur300/mt for Enlite-brand ABS long glass fiber, Calibre-brand polycarbonate and Pulse and Emerge brands of polycarbonate ABS.

This followed announcements by other commodity plastic resin producers to seek an immediate passthrough in electricity costs.

French producer Kem One was the first to make an energy surcharge, with a Eur110/mt charge on top of polyvinyl chloride sales from Oct. 1 announced Sept 23, adding it would revise the situation monthly.

PVC is a key polymer used in construction materials and window profile applications. Chlorine derivatives EDC and VCM are key inputs in the PVC production process. The chlorine production chain process relies heavily on electricity to make PVC.

OTHER PRODUCERS RETHINK SCALE OF CHARGES

Other producers were revising their November pricing ideas in light of the Trinseo announcement. One producer said that it did not agree with the Eur200/mt electricity cost calculation but said it would look to pass through some of the costs to its consumers. It said that it was looking at a Eur100/mt increase to take into account the electricity rise in its November pricing.

An acrylonitrile, butadiene, styrene producer however said that it had seen a number of styrenics producers make these sorts of announcements but that it would refrain from following.

"We are not going for these sorts of announcements. We are not a big player. We are a smaller styrenics player. In terms of price for October we went for rollover. Now with Styrenics and ACN maybe the basket of feedstock costs) will go up a bit more for the next month. We have to wait a week or ten days for the November styrene contract price to settle.," the ABS plastics producer said.