"Dried up" Europe styrene market may get US relief

04 July 2008 16:38  [Source: ICIS news]

By Peter Salisbury

LONDON (ICIS news)--Players discussed an open styrene arbitrage window from the US into Europe on Friday as spot bids hit $1,750/tonne (€1,120/tonne) in a market described as “dried up”.

Cost concerns had caused a number of major players to pull back production over the past several months, players said, with poor end user demand on high feedstock values suffocating the market.

With a number of producers now buying on the spot market to cover their contracted volumes, traders, producers, consumers and brokers all described a tight market as bids skyrocketed against a lack of offers.

Players were still bidding for material, and by Friday it was widely recognised that they would pay $1,750/tonne FOB Rotterdam plus for July loading material, after two record deals early in the week at $1,700/tonne FOB (free on board) Rotterdam and $1,715/tonne FOB Rotterdam.

Offers, however, were not forthcoming.

“There are no prompt July offers,” a broker source said. “There haven’t been for a while. And while there are plenty of buyers looking for material, you can’t bid into a void. If anyone has material, I think they would only really get excited at $1,800/tonne FOB Rotterdam right now.”

With styrene valued at $74-75 cents/gal FOB USG (US Gulf Coast) in the US, equivalent to $1,631-1,653/tonne FOB USG, the broker saw a strong possibility for arbitrage into the region.

“Even if a ship can’t make it into Europe until late July or August, I think people will be looking to get volumes from the US at these prices. I’m pretty sure there a re a few ships on the way already,” he added.

A source at another producer agreed, adding that importing material from the US would probably be a necessity as much as a financial incentive.

“It is impossible to buy material in Europe,” the source said. “The market is completely dry – you can’t get material at any number.”

The possibility of ramping up production rates was on producers’ minds, but would require even higher market values, a source at a second producer said.

“We have been thinking about [bringing rates up] for a while now,” he said. “But at the moment, with energy so high and feedstocks where they are, we can’t recover viable costs. If the price was higher, then maybe it would be a possibility.”

July barge styrene contracts had been settled at record high values earlier in the week, with two sets of contract partners agreeing prices of €1,228/tonne FD NWE and €1,236/tonne FD NWE. 

Despite this, producers said that production remained unprofitable, after a €190/tonne hike in quarterly ethylene contracts and energy costs rocketing on plus-$140/bbl crude oil.

($1 = €0.64)

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By: Peter Salisbury
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