Illiquid Europe styrene causes market volatility

23 September 2008 17:13  [Source: ICIS news]

By Peter Salisbury

LONDON (ICIS news)--A lack of liquidity in European spot styrene saw a daily trading range of $100/tonne (€68/tonne) with turmoil in financial and energy markets leaving traders wary of taking positions, they said on Tuesday.

"It’s tough to do anything because I am not a crude trader," said an aromatics trader source. "I hate hurricane season because you don’t know what might happen. It’s the worst to trade because fundamentals don’t exist any more."

Another styrene trader was a little more upbeat about the lack of activity. "I’m just waiting and watching," he said. "I’m enjoying it. At the moment, I’m surfing the net."

Traders explained that the market was jerking from high to low bids and offers with players seeing ever more widely spread values whilst trying to assess market fundamentals.

With no trades down it was impossible to find a "real" market said one player.

WTI crude had touched $130/bbl overnight, later falling to around $108/bbl. Chaos in the financial world, which was creating volatility in currency exchange markets, was seen as another key driver.

The styrene and benzene markets were viewed as well-supplied to long, with poor downstream demand for each seen as creating a weak market.

Arbitrage opportunities to the US, meanwhile, although workable on paper, were seen as too risky, with shipping still constrained and major uncertainty over the state of production and demand in the region after Hurricane Ike hit the Gulf of Mexico.

Upstream from styrene, benzene had been rumoured as trading at $1,200/tonne CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp), up $40/tonne on trades reported the previous day.

October loading styrene, meanwhile, had opened with bids and offers talked as high as $1,565-1,620/tonne FOB (free on board) Rotterdam, but by 15:15 GMT was valued at $1,520-1,550/tonne FOB Rotterdam by global chemical market intelligence service ICIS pricing, down some $45-70/tonne, and within a $100/tonne daily spread, but with no business done.

"It’s a dead market," explained another trader. "I now have a broker quoting offers at $1,550/tonne and $1,520/tonne. I guess tomorrow we are back to $1,620/tonne."

($1 = €0.68)

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By: Peter Salisbury
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