FocusEurope aromatics fall $100/tonne

06 August 2008 16:54  [Source: ICIS news]

By Peter Salisbury

 

LONDON (ICIS news)--Weak demand, falling energy values and an influx of imports from the US and Asia have seen benzene and styrene values fall $100/tonne (€65/tonne)-plus inside a week in Europe, market participants said on Wednesday.

 

“We underestimated the impact of lower seasonal demand in August,” said one trader. “Asia is now below $1,500/tonne, so we have to see lower numbers in Europe. Frankly, I don’t see $1,700/tonne getting traded this week.”

 

August benzene was talked by market participants at $1,295-1,315/tonne CIF ARA, with bids below $1,300/tonne for the first time in several months.

 

Styrene, meanwhile, was valued by market participants at $1,680-1,720//tonne FOB Rotterdam.

 

Benzene and styrene had been valued at $1,410-1,420/tonne CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp) and $1,800-1,810/tonne FOB (free on board) Rotterdam respectively for August on Wednesday 30 July by global chemical market intelligence service ICIS pricing.

 

Market participants attributed the tumbling values to the arrival of imports from Asia, alongside the psychological effect of dissipating crude oil and gasoline values in a weak demand scenario.

 

Brent crude for September was valued at $117.85/bbl at 14:30 GMT, down almost $30/bbl from the record high $147.50/bbl posted on 11 July. Gasoline had traded at $1,216/tonne FOB (free on board) AR (Amsterdam, Rotterdam) at the same time. A trade was heard at $993/tonne FOB AR.

 

This in turn had added downward pressure to the benzene market and that of downstream styrene, said one trader.

 

“Energy has been a big argument for the prices we have seen recently,” he said. “With that coming off, we need to see downwards adjustment. Asia and the US are already there, and Europe is really hyperinflated right now.”

 

August loading benzene was valued at $1,195-1,210/tonne FOB Korea in Asia, with styrene buyers at $1,485/tonne FOB Korea against sellers at $1,510/tonne FOB Rotterdam. 

 

In the US, benzene was valued at $4.17-4.25/gallon FOB USG (US Gulf), or $1,255-1,279/tonne FOB USG, and styrene at $0.74-0.745/lb FOB USG, or $1,630-1,642/tonne FOB USG.

 

In July, traders had said that they expected styrene prices to soften considerably on a large volume of imports seen coming from the US, followed in September by material from Asia although buyers of EU-only origin were expected to pay a premium.

 

Even this premium was in doubt, however, as buyers held back, either waiting for lower numbers or with positions now sufficiently covered to hold out through the traditionally low demand month of August.

 

“August is basically the low point, and we made the same mistake as last year,” said a trader source. “We lost our shirts then, and so did a lot of other people.” 

 

The much-vaunted EU/non-EU differential would not be as pronounced, added the trader.

 

“I have a pink BMW and a black BMW, and I want to sell the black one for more because it looks better,” he said.  “If nobody buys BMWs, then we don’t have that choice. At the moment we can’t sell either.”

 

In the week ending 10 August 2007, benzene had lost as much as $115/tonne in value in  Europe as crude oil dipped $5/bbl, while styrene lost as much as $145/tonne on value.

 

A source at a major European producer summed up market sentiment, saying that it was unlikely that much activity would be seen in early August.

“We saw this coming, and there wasn’t much we could do,” he said. “We have tried to keep our August positions as balanced as possible and we won’t be active as buyers or sellers for the next few weeks.”

Traders saw selling opportunities as limited, and consensus was that a currently strongly backwardated market would soon flip into contango.

 

“If people can’t sell for August, prompt prices will fall and people will focus on September, especially if they are holding out from buying in August,” said one trader. 

 

“Also, sellers may keep material from August to sell the next month, and they will have to pay storage costs on those.”

 

($1 = €0.65)

 

For more on benzene and styrene visit ICIS chemical intelligence

To discuss issues facing the chemicals industry visit ICIS connect  

By: Peter Salisbury
+44 20 8652 3214

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