Europe October styrene barge contract agreed down €45/t

02 October 2009 11:45  [Source: ICIS news]

Europe Oct styrene barge contract down €45/tLONDON (ICIS news)--The European October styrene barge contract has been agreed at €829/tonne ($1,201/tonne), down €45/tonne from September, a producer and a consumer said on Friday.

“The drop represents a compromise of raw materials and strong spot quotations,” the producer involved in the negotiations said. “At the same time, it reflects the backwardation we see into November.”

This was echoed by the consumer: “We could not get the complete reduction in upstream costs, because spot levels are still quite high.”

Although other market players had expected the decrease - after upstream benzene costs came down by €71/tonne for October on Thursday and ethylene contracts fell by €15/tonne last week - there was disagreement over the extent of the fall.

A producer, who was not directly involved in the negotiations, said: “This is the correct value if you take into account where the spot market is.”

A consumer, however, had originally been hoping for the full upstream decrease to be passed on: “If we see the full decrease, it helps us for two months before we need to pass this on to our customers.”

Despite continuing weak downstream demand, styrene spot values had held their ground in recent months at just above the $1,100s/tonne.

However, sources agreed that November and December would see softer values. They said that demand was traditionally weak at the end of the year, due to de-stocking processes, although one producer was hopeful that players would be “much more disciplined this year”, adding that there would be smaller de-stocking activities than last year.

Nevertheless, the market saw a hefty backwardation from October into November, sources said.

October values were assessed at $1,110-1,130/tonne FOB (free on board) Rotterdam on Friday morning, while November was more than $100/tonne lower at around $1,000-1,020/tonne, according to global chemical market intelligence service ICIS pricing.

The backwardation was mainly caused by tight prompt availability and issues with transportation via the Rhine River, players said. However, one producer said that this was not actually a fair reflection of market fundamentals.

“October values are too high and November numbers are too low. As the month progresses, the two will get closer together,” the producer said.

The contract was settled on a free delivered (FD) northwest Europe (NWE) basis. September settled at €874/tonne.

($1 = €0.69)

For more on styrene visit ICIS chemical intelligence
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By: Madelon Ten Cate
+44 20 8652 3214

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