Styrene margins in the US and Europe are too unpredictable to justify long-term capacity investments despite a strong first quarter, Trinseo chief executive Chris Pappas said today.
"We've done some pretty good analysis of the economics of investing in styrene as you might imagine. Over the last 30 months, even though we've had these relatively decent and increasing margins in styrene, only one or two of those months in Europe have had margins high enough to support investments in a new facility," Pappas said on an earnings call. "If you look in the US, where margins are higher, we've only seen seven or eight months in that period that have been high enough to justify new investment."
Trinseo reported $76.7mn in profit in 1Q, up from $37.7mn during the same period of 2015, largely because of stronger margins on styrene, which exceeded the company's earlier guidance.
Lower feedstock costs contributed to higher styrene margins. During the first quarter of this year, US spot benzene prices averaged 192.56¢/USG, down from 218.51¢/USG a year ago. Spot ethylene prices averaged 21.84¢/lb during the first quarter, down from 35.53¢/lb a year ago, according to Argus Dewitt data.
The Berwyn, Pennsylvania-based company revised its earnings guidance for its plastics and feedstocks division, which includes styrene, slightly lower to $90-$100mn next quarter, because of planned turnarounds.
