Price and market trends: Europe styrene facing upward pressure from benzene, Asia

07 December 2012 10:32  [Source: ICB]

Significant imports into Europe early next year could bring prices down sharply amid ongoing macroeconomic weakness

European styrene prices face continued upward pressure from a bullish benzene market as December approaches, but weak end-user demand is keeping margins between the two slim according to sources.

Prompt availability for styrene in Europe remains ample, despite the force majeure at Shell's Moerdijk site in November, as offtake from key end-use markets like polystyrene (PS) and expandable polystyrene (EPS) eases ahead of the holiday period.

November material traded several times in late November at $1,470-1,480/tonne (€1,132-1,140/tonne) FOB (free on board) Rotterdam, and there was even a deal as low as $1,455/tonne on a CIF (cost, insurance and freight) basis.

MARKET IN CONTANGO
The market is in contango, however, with December cargoes opening relatively steady since the previous week's close at $1,510-1,540/tonne, while January material was higher still at $1,530-1,560/tonne.

However, the market started firming again amid rumours of production problems at the Elba site, a joint propylene oxide (PO)/styrene monomer (SM) venture between Shell Chemical Europe and BASF.

Bids for December cargoes went as high as $1,560/tonne, and there were deals heard at $1,570/tonne for December and a prompt November trade at $1,550/tonne.

However, it remains unclear whether the current spike will be sustainable, as the previous styrene bull-run, stemming from supply concerns following the Moerdijk force majeure, was short-lived.

"It depends on whether Moerdijk comes back on line by the end of [November]," said one major consumer.

And while the next two months are looking firmer, there was concern that any major import volumes into Europe early next year could bring prices down sharply amid macroeconomic weakness.

"I do have a bit of a fear we are going to see a big load of imports, and January is going to see a massive fall in pricing," one trader said.

LACK OF ARBITRAGE
Currently there does not appear to be arbitrage between the regions, with Asian material valued as high as $1,590/tonne FOB Korea for December, while previously the US market hovered around the $1,530/tonne level on a FOB basis, in a quiet market ahead of the Thanksgiving holidays.

Conversely, with as much as 15,000 tonnes being shipped from Rotterdam to Asia, and an additional 7,000-10,000 tonnes of space being looked for, there is even some speculation that Europe could tighten in the coming weeks despite the weak derivative demand.

With European benzene looking poised to move up further in December on bullish fundamentals, pressure will remain on styrene in a market where production margins are already tight.


By: Truong Mellor
+44 208 652 3214



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