FocusEurope styrene, benzene firming in Q3 on availability issues

19 July 2011 12:46  [Source: ICIS news]

By Truong Mellor

Europe styrene, benzene firms in Q3LONDON (ICIS)--Despite the onset of a slump in demand due to the traditional summer holiday slowdown, European styrene values have risen by almost $100/tonne (€71/tonne) in July as firming aromatics numbers in Asia and the US and upcoming turnarounds prompted an upturn in pricing, sources said on Tuesday.

Despite a predicted drop in July barge contracts on the back of lower feedstock costs, spot values have steadily gained as the month has progressed.

The midpoint of July deals during the first week of the month was $1,355/tonne, according to ICIS data. Bids and offers for July were at $1,440–1,450/tonne FOB (free on board) Rotterdam on Tuesday morning, with August at a $20/tonne contango.

One European trader said that the upwards movement on styrene was largely coming from higher benzene prices.

“With July benzene close to $1,200/tonne now, this means a minimum base for styrene of $1,450/tonne. Sellers will be likely to push for $1,500/tonne,” said the trader.

European benzene values have risen by $70/tonne in July, largely on the back of a bullish US market, in which prices have moved over the $4.00/gallon mark. This has meant that several domestic players are actively looking to ship cargo to the region, and sources said that at least three vessels have already been fixed.

Another trader said that some production problems in the Mediterranean are also having an effect on northwest Europe (NWE) pricing. In addition to this, poor margins for Asian hydrodealkylation (HDA) producers means that they may cut back on output or shut down altogether.

For both benzene and styrene in Europe, August has remained at a steady $10–20/tonne contango to July for most of the month, which seems at odds with the slowdown in demand that the summer holiday period usually entails.

However, rising Asian numbers on the back of healthy demand and technical problems restricting supply have been felt in Europe, and the scheduled shutdown of several European producers in August and September has led to a spike in buying activity this month, as players look to cover themselves.

Another driving factor is the slowdown in propylene oxide (PO) demand, which has meant that propylene oxide styrene monomer (POSM) units are running at reduced rates, further limiting availability.

There are also numerous turnarounds scheduled in Asia for August and September, and with units with a total estimated annual capacity of 2m tonnes expected to come off line, the global market is expected to severely tighten during this period.

“We are already seeing September bids at a contango to July,” said one trader, “and these are not met with any offers. August demand is expected to be down, but with people coming back on stream in September and there still being availability issues, the market will really start to firm.”

One source said that while demand from key downstream markets has softened slightly as summer approached, it still expected some buying interest next month.

“EPS [expandable polystyrene] has been a bit weak in July, but some players haven’t covered everything yet so they will still need to buy in August.”

($1 = €0.71)

For more on benzene and styrene visit ICIS chemical intelligence

By: Truong Mellor
+44 208 652 3214

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