09 February 2012 12:02 [Source: ICIS news]
LONDON (ICIS)--European February styrene prices have been pushed up this week by rising feedstock costs and keener buying interest, and the market is expected to continue on an upward course to top $1,500/tonne (€1,125/tonne) in February, players said on Thursday.
“It was due to happen,” said one aromatics trader, citing simple feedstock economics as the key to the higher numbers.
“With benzene trading at $1,270/tonne this week and the ethylene contract price at around $1,600/tonne, styrene had to already be at $1,430/tonne or above.”
The February ethylene contract was settled at €1,219/tonne on an FD (free delivered) NWE (northwest Europe) basis – an increase of €99/tonne from the previous month. Spot material availability is said to be tightening this month, with numbers fast approaching the February settlement level.
After peaking late last month at $1,310/tonne, February benzene spot values eased off slightly earlier this month. Deals were done for February delivery last week within a range of $1,225–1,280/tonne, while deals this week have been confirmed at $1,265–1,270/tonne so far.
Despite the buoyancy seen for benzene, domestic styrene levels have struggled to keep up in 2012 so far, as sluggish demand in January brought the benzene/styrene margin well below $200/tonne last month.
“We did see some bullishness in January, but it was short-lived,” said one source. “It seemed to be driven more by crude and benzene, rather than better styrenics demand.”
However, with ethylbenzene (EB) and styrene monomer (SM) production struggling with poor margins, sources believe that industry is now starting to wade into the market.
Despite the current cold weather snap, several players also said that propylene oxide (PO) demand has not seen any corresponding gains, which is keeping PO/SM production levels muted as well.
One styrene producer expressed surprise at this: “PO isn’t running hard at all, which is strange. With the current weather, you’d expect all the airports to be buying de-icer. Perhaps they were already stocked up.”
Adding to the current bullishness are the high prices being seen in both the US and Asia, which means that the arbitrage window between the regions is effectively shut.
FOB Korea styrene prices are already comfortably north of $1,400/tonne as the turnaround season approaches, keeping any export opportunities into Europe effectively stymied, while high benzene costs and strengthening seasonal demand kept US prices on a par with the European market.
As a result of all this, European styrene prices are creeping up. February deals were done last week at $1,405–1,445/tonne on an FOB (free on board) Rotterdam basis, but this week has seen cargo for February delivery already change hands at $1,450/tonne, $1,455/tonne and $1,465/tonne, while March deals have been done at $1,470–1,480/tonne.
How high can the styrene market go? While prices went soaring up to $1,600/tonne in November, most players felt this was an exceptional supply situation at the time – a view borne out by the subsequent sharp drop seen in the following week – and that prices as high as this were not sustainable in the current market.
“The numbers will get firmer,” said a styrene trader. “We’ll probably see the market go up and down a bit with energy levels. Crude was up on Wednesday, so that also supported the gains.”
Another source told ICIS: “If levels reach $1,500/tonne, this will be tough for polystyrene [PS] to stay competitive, but we could see numbers go that high as the market tries to stabilise itself.”
($1 = €0.75)
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