Europe Nov styrene may not settle on benzene dive

03 November 2008 16:28  [Source: ICIS news]

LONDON (ICIS news)--Europe November styrene contracts may not be settled after an “impossible” 60% fall in monthly benzene contracts, with finalised contracts unlikely on Monday, market participants said.

“Maybe there won’t be a contract settlement in Europe this month,” said a source at one major producer. “How can you settle when there is no clear direction to the market?” he said.

Athough no fallback mechanism was in place, the better route would be not to settle contracts for November at all, he added.

Benzene contracts were settled on Friday at €316/tonne FOB NWE, marking a decrease of €481/tonne from November, a 60% drop, and unprecedented in recent petrochemical markets, according to players.

Negotiations for November styrene contracts stalled thereafter, and the source said that the cost position the drop posed was “not acceptable to producers” as it would create negative cash margins.  

The statement was in line with fears voiced by market participants the previous week, with the fourth-quarter ethylene contract squeezing margins as buyers pushed for full feedstock decreases.

With 80% benzene versus 30% ethylene seen as the make-up of styrene values, buy-side expectations were that they should see decreases of €380/tonne plus.

“The market is extremely long, and I would expect to see this or €20/tonne or €30/tonne more,” said a consumer source.

“If we have a decrease of €380/tonne we will have very, very negative margins,” said a source at another major producer. “We will not settle the contract price today,” he said.

“It doesn’t look good.”

($1 = €0.78)

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By: Peter Salisbury
+44 20 8652 3214

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