16 November 2012 09:29 [Source: ICB]
European styrene prices are likely to soar following Shell Chemicals' declaration of force majeure on styrene at its Moerdijk site, with firm benzene costs also supporting the bullishness, sources say.
While the November barge contract for styrene settled lower on softer demand and the arrival of imports - despite a €34/tonne ($44/tonne) increase for feedstock benzene this month - the sudden declaration of force majeure by Shell Chemicals saw November spot prices gain $75/tonne.
Deals for November were done at $1,525/tonne on 5 November, and speculation about technical issues at the Moerdijk site saw prices rise to $1,550/tonne.
On 6 November, offers opened at $1,590/tonne and a deal was done at $1,570/tonne before confirmation from Shell of the force majeure, the result of a steam leakage in the styrene monomer (SM)/propylene oxide (PO) plant. November later traded at $1,580/tonne and $1,600/tonne. Offers for November and December were at $1,620/tonne, while January was already in contango, with offers at $1,630/tonne.
News of the force majeure was met with some aggressive bidding in the market, as players looked to quickly cover short positions. "November had less imports into Europe because everyone thought demand was off this month," one styrene trader said. "Tanks are low, so when Shell starts buying December cargo to cover from traders it leaves less about, so we could see some real fireworks," the trader added.
Continued bullishness for benzene this month - prices have moved back above $1,400/tonne on continued pyrolisis gasoline (pygas) restrictions limiting production - will also lead to further anxiety in the styrene market. Strong benzene prices mean many producers have been selling benzene instead of using it for styrene production, and simply covering needs on the spot market.
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