Europe April styrene barge to settle only once - source

01 April 2010 14:02  [Source: ICIS news]

LONDON (ICIS news)--Only one European styrene barge contract is expected to settle in April, as two of the players involved in the talks mutually agreed it would be too difficult to come to a compromise this month, according to one of the players on Thursday.

It was only since February that a new set of contract partners decided to publicly publish a contract price, bringing the pairs of settlers to a total of two, after almost a year of a single barge agreement.  

Players have been expecting the April styrene barge contract to go up by at least €100/tonne ($135/tonne), based on raw material increases and rising styrene spot values.

Upstream ethylene contracts for April were agreed last week up €20/tonne from March at €960/tonne, but on 31 March there was still debate as to where the upstream benzene contract would settle.

Most sources expected it to increase by $191/tonne or €142/tonne, after spot benzene values had spiked in recent weeks, especially for prompt material. 

This meant that the raw material increase for styrene contracts would amount to approximately €115/tonne. One of the players pulling out of the talks said this was unacceptable.

“Benzene is so heavily backwardated, I cannot agree a monthly contract based on a snapshot of benzene,” the source said.

At the same time, it appeared that the supplier involved would be looking for an additional margin increase, on top of the raw material hike, which would make it even more difficult to come to a satisfactory compromise. This could not be confirmed at the source, however.

The pair of settlers left to negotiate the barge contract was not expected to start the discussions before full confirmation was received on the April benzene contract.

The negotiations could prove to be quite tough. “The expected raw materials increase is far away from our expectation, and it seems we are coming close to 2008 levels,” a source said.

“This is unrealistic considering we are only just coming out of a recession.”

With one of the partners stating he was in “no rush to settle”, it was uncertain when the April barge contract would be agreed.

The March barge contract had been agreed at €1,047/tonne FD (free delivered) NWE (northwest Europe).

 For May, market sources could be expecting two barge contracts once again.

“Although this is a setback, we are still hopeful that we can take part in future settlements,” said the consumer that was refraining from publishing a barge contract.

“As the largest purchaser of third-party material, we have a valuable role to play.”

($1 = €0.74)

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By: Madelon Ten Cate
+44 20 8652 3214

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