27 November 2008 14:47 [Source: ICIS news]
LONDON (ICIS news)--The European styrene contract price mechanism presents a significant challenge to the industry, a major consumer said on Thursday.
There was a widespread view that the volume settled under the styrene reference contract was unrepresentative of the true volumes bought and sold in Europe, said David Cunningham, business manager styrene Europe for INEOS NOVA, in a paper prepared for the 7th ICIS European Aromatics and Derivatives Conference.
There was also no voice in the settlement process for the polystyrene sector, he said.
The negotiating process was driven by raw materials, he said, but the spread between the monthly benzene and styrene contract prices had been gradually widening in the past four years.
In 2004, with crude at $40/bbl, the spread between the two reference contract prices averaged around the low €200s/tonne, whereas in 2008 the spread had averaged closer to the low €300s/tonne, he said.
When crude oil had been close to $150/bbl in mid-2008, the benzene/styrene spread had hit a peak in the high €300s/tonne, but now that crude was back to around $50/tonne, it was conceivable that the spread could go back into the low €200s/tonne.
In addition to this, the divergence between the lowest and highest of the main three barge settlements had widened enormously, Cunningham said.
A three-year trend line showed that the average divergence had increased from €10-20/tonne to around €60/tonne.
Indeed, the most recent ICIS published reference prices for the styrene FD (free delivered) barge NWE (n?xml:namespace>
The two-day conference ends on Thursday.
($1 = €0.78)
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