Europe PS market waits for July styrene verdict

25 June 2007 16:43  [Source: ICIS news]

LONDON (ICIS news)--European polystyrene (PS) players were waiting for the settlement of July styrene before expecting any clear direction to emerge for their own business next month, market sources said on Monday.

 

Styrene was widely expected to decrease in July. This expectation had already impacted on June business, slowing demand as buyers expected to be able to buy lower-priced material next month.

 

One major producer already reported running at reduced rates to counter the slowdown in volumes, insisting that it would not allow any oversupply to creep into the market.

 

Year-to-date volumes were up more than 3% on last year.

 

PS producers admitted that a lower July styrene contract would exert downward pressure on PS, but this did not mean that they would automatically drop PS prices as styrene fell.

 

“Margins are still very poor at large, low-priced accounts,” said a major PS producer on Monday. “We aim to retain any drop in styrene next month.”

 

Much depended on the extent of the drop in the July styrene price.

 

“It would be better for us if styrene fell really significantly,” said another PS Producer. “If styrene fell by €100/tonne [$134/tonne], we could improve our margins easily.”

 

Yet another PS producer did not expect such a fall, however.

 

“Given today’s spot benzene situation, and the likely increase in third-quarter ethylene, I expect styrene to fall back by €40-50/tonne,” he said on Monday, “and I want to keep that money. Supply and demand are the drivers of the PS market at the moment, and I see a rollover as the most likely outcome for July PS.”

 

The benchmark June styrene contract price of €1,199/tonne FD NWE was set on 31 May, when the spot price was $1,540-1,560/tonne FOB (free on board) Rotterdam, at an increase of €49-69/tonne on the May contract.

 

Some PS players felt that this contract was artificially high, given the decrease in spot monomer seen almost immediately after its settlement.

 

Spot styrene has slumped since the June contract was settled, but has rallied since, leaving spot monomer at $1,370-1,385/tonne FOB Rotterdam on Monday.

 

Spot benzene was at $1,100-1,120/tonne CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp) on Monday.

 

Buyers were not against the idea of PS producers improving their margin, but they did expect to be sharing any drop that might occur in July styrene.

 

“I don’t mind producers improving their margin in a falling market,” said one buyer, “but I do expect to be getting lower PS prices in July, even if styrene only falls by €40/tonne.”

 

The settlement of July styrene was eagerly awaited, with most observers expecting an outcome of monomer discussions by Friday 29 June.

 

By: Linda Naylor
+44 20 8652 3214

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