April SM, benzene forecasts invert on spot swing

27 March 2008 17:04  [Source: ICIS news]

By Peter Salisbury

LONDON (ICIS news)--The volatility of European styrene and benzene spot market values alongside currency and energy complex fluctuations has led to an inversion in April contract forecasts, market participants said on Thursday.

“A week ago, styrene was trading at $1,420-1,440/tonne (€895-907/tonne). We thought that on this basis a decrease of €40/tonne would be possible,” said one buyer.

"Now spot values are at around the $1,500s/tonne, it looks like a rollover, or a decrease, or an increase could be possible. We just can’t tell.”

On 20 March styrene had been traded at $1,420/tonne FOB (free on board) Rotterdam for March loading, $90/tonne lower than that week’s highest front-month deal of $1,510/tonne FOB Rotterdam, as Brent crude values tumbled to $98.81/bbl.

At the time, players looking at both upstream benzene, which had traded at $1,110/tonne CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp) and styrene, both some $100-110/tonne lower in price than February’s highest recorded deals, had thought that a reduction in contract values for April would be probable.

A week later, however, this situation had been reversed, with benzene trading at $1,180/tonne CIF ARA for April and styrene deals rumoured at $1,490/tonne FOB Rotterdam and $1,495/tonne FOB Rotterdam.

Crude had been the instigator of the surge, players said, with Brent crude trading at $104.95/bbl at 15:50 GMT, up $6.15/bbl from the previous week.

“It really is a bit of a rollercoaster ride,” said another styrene buyer. “Ethylene went up for April, which wasn’t what I expected it to do. And styrene, in the space of three to four days, has gone from a rollover to a decrease in euro terms, to a strong rollover to an increase.”

Second quarter ethylene contracts was largely considered established at €1,038/tonne FD NWE. Ethylene is a secondary feedstock for styrene production.

Euro/dollar dynamics were also an important issue, a benzene producer source said:

“Spot values are coming up on crude but where the dollar was stronger this time last week, it is a little weaker now. At the current market, $1,180-1,200/tonne equates to €743-756/tonne where in February it was €780-790/tonne.”

The March benzene contract was settled at €787/tonne FOB NWE (northwest Europe) at an official exchange rate of $1 = €1.5121, on the basis of the then-current spot market.

The exchange rate on Thursday was $1 = €1.5814.

“Until benzene settles, we can’t know what styrene will do,” said an aromatics trader.

“And a the moment, depending on when it is settled, on crude, and on the dollar, it really could be anything around a rollover to a decrease or maybe even an increase.

($1 = €0.63)

For more on styrene and benzene visit ICIS chemical intelligence

By: Peter Salisbury
+44 20 8652 3214

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