US styrene market participants at odds over Q4 direction

16 November 2012 09:28  [Source: ICB]

Recent tightness in the upstream benzene market raises expectations that benzene spot prices may remain elevated

With the US October styrene contracts settling at a slight increase of 0.75 cents/lb ($17/tonne, €13/tonne), market participants are already looking to prepare trading positions for the remainder of the fourth-quarter and the start of the first-quarter of 2013.

But those styrene trade participants are also conflicted because of weak overseas global demand and high feedstock benzene prices. Benzene demand from the styrene market has been weaker than expected in the fourth quarter. Styrene demand from overseas has also been mostly held to Europe in the fourth quarter.

Styrene spot activity has been limited late in the third quarter and early in the fourth quarter because of weak domestic and overseas demand. Seasonal demand in September and October is typically strong from Asia ahead of the winter holiday retail shopping season. But that demand did not materialise as expected.

The soft demand led some suppliers to reduce operating rates, now causing some to cite tight inventories. Despite the lower rates, styrene consumers have had no issues in sourcing styrene. These soft market conditions are evident by recent production and ­inventory statistics from the American Fuel and Petrochemical Manufacturers (AFPM) and import/export data related by the International Trade Commission (ITC).

Q3 production and stockpiles were shown to be lower, while imports and exports were also shown to be down compared with a year earlier. Currently, the majority of styrene market participants have already said they expect an increase in the November styrene contract price, based on the record high feedstock benzene contract.

Producers have already issued November price increases of 6-7 cents/lb, with the contract expected to settle in the first two weeks of December. Typically aromatics prices fall during the fourth quarter as producers and some consumers finalise their positions and start de-stocking inventories for end-of-year tax purposes.

With the recent tightness in the benzene market, some trade sources expect benzene spot prices to stay tight to the end of the year. Because of the current high benzene prices and future uncertainty, some producers have argued spot levels may stay on either side of the 70 cent/lb mark on a cost basis. But following the November contract settlement, many styrene trade sources may remain unclear as to how December will play out.

By: Brian Balboa
+1 713 525 2653

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