European benzene, styrene players uncertain of market direction

10 March 2011 14:47  [Source: ICIS news]

LONDON (ICIS)--A degree of uncertainty surrounding market direction plagued European benzene and styrene players on Thursday, as lengthening supply and increasing bearishness brought price ideas down despite ongoing strength for crude and energy futures.

Bearish sentiment for March and the arrival of imports from Asia brought European benzene values down by almost $100/tonne (€72/tonne) this week.

After closing on Friday 4 March at $1,370-1,390/tonne CIF (cost, insurance, freight) ARA (Amsterdam, Rotterdam, Antwerp), March benzene values continue to drop this week.

By Wednesday 9 March, the range had come down to $1,270-1,290/tonne CIF ARA, and a deal was done at $1,285/tonne. On the morning of March 10, offers for March benzene were heard as low as $1,260/tonne.

After two months of bullishness due to rising crude prices, restricted availability and healthy demand, several players now believe that the European benzene market has reached its peak price-wise.

“In this market it is either feast or famine. Prices have been continually high since the beginning of the year, but we expect them to come down a lot in the next few weeks," one trader said.

There are numerous reasons for the bearishness, including the arrival of imports from Asia throughout March and April, which has started to ease the availability issues that have plagued the market since late January.

Some estimates put the total amount of material due to arrive at 100,000 tonnes, with over half of that scheduled to land in March.

With many players seemingly covered for March, bids grew scarce as the week progressed. Some aggressive selling from traders quickly brought price ideas back below $1,300/tonne.

However, with a spate of planned shutdowns scheduled for March and April, there are some players that remain unsure of how the market will unfold over the next few weeks.

“There are a lot of factors involved,” said one supplier, adding: “The imported material could be more than compensated for by the shutdowns, which would keep the market balanced to tight.”

Combined with ongoing strength on crude and energy futures, the supplier added that there is still a degree of uncertainty around the direction of the market.

“It is tough to take a position right now. March appears well supplied, so the market should come down. There seems to be more focus on April at the moment. But we have to look at how styrene is running,” another source said.

There also appears to be mixed signals coming from the European styrene sector. With seasonal de-icer demand slowing down as the weather improved, there is an expectation that this will lead to reductions in POSM (propylene oxide/styrene monomer) output.

“We don’t see spot cargo coming in from the Mediterranean anymore,” said one producer, adding; “and with the better weather now we should see an upturn in demand from the construction industry."

However, with questions surrounding the unrest in Libya and its potential impact on crude values, shipping and insurance, other producers are less sanguine.

PO demand is still strong,” said one trader. “Perhaps it is lower than it was in January and February but it is still good.”

European styrene values also moved down significantly this week. March traded at $1,530/tonne on Monday 7 March, but by Thursday offers have come down to $1,440/tonne, with an unconfirmed deal heard at $1,435/tonne.

One trader felt that the downturn in pricing is simply due to the market becoming overheated.

“On a pure supply and demand basis, when costs become too high there is demand destruction,” the trader said. “Customers downstream hold back, thinking that the prices are too high.”

Several players believe that, as with benzene, there is some length in the styrene market which is forcing price ideas down.

“That is why we are seeing this step downwards,” said one source. “It seems that traders are offering material direct to industry at lower numbers than they offer via the brokers. However, what they don’t know is how much industry still needs to buy.”

Another player was more succinct in his appraisal of the market: “Trust and faith usually arrive on foot but leave on horseback.”

($1 = €0.72)

For more on benzene and styrene visit ICIS chemical intelligence

By: Truong Mellor
+44 208 652 3214

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