25 November 2002 00:00 [Source: ICB]Recent styrene monomer price volatility confirms the fragility and interdependency of the global supply balance.
The unplanned outage at Ellba's 550 000 tonne/year styrene facility in Singapore, after the declaration of force majeure on ethylene and propylene at ExxonMobil's cracker, supported a spike in Asian monomer prices, which rose to a $670/tonne cfr China high last week.
This Asian price spike triggered higher offers in Europe and in the US as traders started to source product to fill the gap left by the Ellba outage in Asia.
BASF hopes to resolve the outage by the end of the month, but much depends on the restart of the ExxonMobil cracker.
European producers say that, with product moving to Asia, supplies should tighten and the arbitrage will help reduce inventories. Some say they expect a reasonable start to 2003 with increasing spot numbers during the second half of quarter one, but other players highlight the poor performance of polystyrene during the past two months and describe supplies as balanced to long, with an uncertain outlook for quarter one next year.
Next year will also see the startup of the Bayer-Lyondell SMPO joint venture in Rotterdam, the Netherlands, bringing on 640 000 tonne/year of styrene monomer on the market.
The shift in Bayer's market position will leave a gap on the buying side of the traditional quarterly settlements. There are still different options being considered by market players as to how the settlements will be achieved from quarter two 2003 onwards. Another big consumer may take the place left by Bayer, say some players, but no one has yet taken the initiative.
A major European producer suggests a different option may gain support in the market: 'Individual negotiations will have to take place between sellers and their customers which will result in a reference price on which there is consensus among market participants.'
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