11 March 2005
11 March 2005
A leading European resin producer offers some explanation for the spiralling costs of resins, which are likely to continue for the immediate future.
Readers of Netcomposites news will be all too familiar with the incessant price increases for resins across the globe, with four more increases issued in today's newsletter.
Gertjan de Koning, Business Director DSM Structural Resins Europe, states that the continuing increases are a reaction on the continuing volatility of raw material prices, coupled with a tightening of supply due to the unprecedented worldwide demand for key materials such as Benzene.
In a presentation entitled “Composite Industry-Rapidly changing conditions”, Gertjan de Koning commented that “because of increased demand, basic raw materials have got very tight driving up the prices. Relief by new capacity coming on stream is not foreseen for at least the next 2 years.”
In particular de Koning points to the two main constituent ingredients of Benzene and Styrene which are experiencing high costs at unprecedented levels. Benzene, for example has increased €701/ M ton for February from a 12 months low of 547 €/M ton in January (up 169% since January 2004). Benzene, which is no longer linked to oil prices is still in short supply and will remain so for the foreseeable future.
Prices of styrene also parallels the volatility of Benzene, with prices increasing again after experiencing a period of falling prices last year. The contract price for February is €980/ M ton (Up by 150 €/M ton) and still increasing steadily on the back of benzene, back to the unprecedented levels of Q4 2004.
The primary reasons for the increases are that global demand has increased significantly compared with 2003, and continues to rise. Against this, the global supply capacity is limited, especially with no new plans for expanding current capacity of Benzene, neither has there been any recent capacity expansions over the past few years, placing enormous pressure on materials.
DSM suggested that one of the reasons for the volatility is that those mainly affected by the price increases are the small companies, who leave the market and then re-enter when costs are more within reach, something the larger producers do not experience in the same capacity due to the volume of business they enjoy. Adversely, when prices fall, smaller companies re-enter the market further injecting volatility in to the market.
DSM also suggested that gearing production and processes away from styrene use and towards say, bio-resins was not an option, but that resin producers would continue to raise prices and pass the costs over to the consumers.