Europe-US styrene arb open, but no takers

10 October 2008 17:15  [Source: ICIS news]

By Peter Salisbury

LONDON (ICIS news)--Paper arbitrage windows on benzene and styrene were theoretically open but unworkable in practical terms in a structurally long and falling global market, benzene and styrene market participants said on Friday.

“It’s a global phenomenon of global demand,” said one European trader. 

That has disconnected the trans-Atlantic markets, sources said.

“Where European benzene was trading at US cost plus freight, it is now below that value as there is no movement,” said an industry source. 

“We feared the arb would go on lower numbers, but in the US yesterday we saw offers but no bids.” 

This showed a lack of demand for benzene despite tumbling prices in the US, the source said.

Players in the spot benzene and styrene markets said that regional values show the potential for profitable movement of material between global regions.

But a lack of demand and falling prices in all locations rendered any such notion useless.

“If you were absolutely new, stupid and ignorant, you might try to do it,” a European styrene trader said of the possibility of moving Asian styrene into Europe. 

“But I don’t think anybody in their right mind would try to do it.”

A US buyer speculated that someone might try to bring styrene into the US just to make a point to domestic producers, who have tried to hold offers around 74 cents/lb ($1,631/tonne) FOB (free on board) US Gulf this week despite plunging global markets.

But the buyer and a US-based trader said the lack of demand would effectively rule out any such move.

"It is really just abysmal," the trader said.

The US sources said any US spot deals would be unlikely to occur until November, with the mid-60s cents/lb being a more realistic level for the next trade.

In Europe, benzene and styrene with October loading were valued at $850-890/tonne (€635-650/tonne) CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp) and $1,120-1,150/tonne FOB Rotterdam on Friday afternoon.

November loading material for the respective products had been valued at $840-870/tonne CIF ARA and $1,110-1,130/tonne FOB Rotterdam.

In Asia, October loading benzene had closed valued $810-820/tonne FOB Korea and styrene at $1,000-1,010/tonne FOB Korea.

According to global chemical intelligence service ICIS pricing, shipping rates for 5,000 tonne plus loads from Asia into the EU were $110-120/tonne, from the EU to the US were $64-69/tonne, and from Asia to the US were $115/tonne.

Values had fallen in all regions during the week on energy complex losses and fears over forward demand given turmoil in world financial markets and negative economic indicators.

In Europe, benzene and styrene values have fallen 24% inside a month, and Asian prices were at a 21-month low.

US prices have been dragged down with gasoline amid a crumbling demand outlook, despite the supply interruptions caused by Hurricane Ike.

Additional reporting by Stephen Burns in Houston

($1 = €0.73)

For more on benzene and styrene visit ICIS chemical intelligence

To discuss issues facing the chemical industry go to ICIS connect 

By: Peter Salisbury
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