FocusEurope styrene spot prices fall on long supply

22 October 2009 15:05  [Source: ICIS news]

By Truong Mellor

LONDON (ICIS news)--Spot prices in the European styrene market have fallen by up to $100/tonne (€66/tonne) this week, as supply lengthened and downstream buyer interest remained subdued, sources said on Thursday.

Deals for prompt October and November delivery were heard at $1,000/tonne FOB (free on board) Rotterdam on Wednesday, down by $60-100/tonne from the previous week’s levels.

“POSM [propylene oxide styrene monomer] plants are running much harder now,” said one trader. “Buyer interest is still down, so October now seems long.”

While many players had expected the spread between feedstock benzene and styrene to narrow in the fourth quarter, the current drop in styrene spot values caught many in the market by surprise.

“A drop of $100/tonne in a week was hard to foresee,” said one trader. “Especially when benzene has remained relatively stable.”

The trader added that POSM sellers could no longer produce profitably, given the current spread between benzene and styrene.

Deals for November Benzene were heard on Thursday at $880-895/tonne CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp), keeping the spread between benzene and styrene below $120/tonne. A spread of $200/tonne between the two was required for profitability, according to several sources.

However, other sources felt that the raft of imports coming into Europe was having more effect on supply/demand perceptions in the market.

One source said: “There is a lot of CIF material coming into northwest Europe from Spain and, in particular, the US, where domestic demand is weak.”

A trader added: “Imports are still coming; some parcels are already placed, some cargo for the second half of November is on offer. Trade bought and is now sitting on US positions, which is one reason why spot prices are coming off.”

How the fall in spot prices would affect market dynamics for the rest of the year was uncertain, but players all conceded that the outlook for the fourth quarter was decidedly bleak.

“Based on feedstock costs, strange things could happen,” said one source. “However, supply/demand fundamentals indicate that an upturn is unlikely. Demand will really have to pick up a notch.”

Another trader agreed, adding that more imported parcels were scheduled to arrive in Europe by mid-November.

“Several players are bringing in 5,000 tonne slugs for landing by mid to late November,” the trader said. “Unless someone starts cutting back significantly on production, the market will be very long by then.”

As for how these developments would affect November contract talks, sources were unsure whether the plummet in spot prices this week would be reflected in the contract price.

One trader said: “Regarding the November contract, it is an interesting question. Players will obviously want the drop reflected in the price, but feedstock producers will scream ‘no’.”

The trader added: “It could be that customers that are contractually obliged to take contracted volumes will pay a high price in November.”

Players in the downstream polystyrene market said that they expected the November price to move up regardless of styrene spot levels, due to tightness in the benzene sector.

($1 = €0.66)

For more on styrene and benzene visit ICIS chemical intelligence
To discuss issues facing the chemical industry visit ICIS connect

By: Truong Mellor
+44 208 652 3214

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