25 January 2013 10:47 [Source: ICB]
European styrene prices have faltered so far in January on soft demand and upstream bearishness, but looking ahead the market is expected to firm.
As demand from key end-use sectors struggles to pick up, due partially to the impact of high feedstock costs but also to wider macroeconomic uncertainty, European styrene pricing continues to take cues from the upstream benzene market, where ARA (Amsterdam-Rotterdam-Antwerp) numbers saw some erosion in early January in line with global bearishness.
"With no imports into Europe from the USA or Asia, prices will have to move in line with production costs," explained one trader.
January styrene spot deals were done as high as $1,730/tonne (€1,298/tonne) early in the month, before global benzene prices slumped. This led to some lower European numbers, with styrene trading at $1,605/tonne.
Several players also noted softer demand for styrenics than previously expected. As the bull run on pricing since last year had been feedstock-driven, some correction was inevitable once upstream costs started to slide, they argued.
However, any relief for buyers is likely to be short-lived. The market has already moved into contango, with February material now valued higher than the current month. "We are at the second half [of January] now," said one source. "So that's normal."
But a raft of planned shutdowns scheduled for later in the first half already has some players looking to secure volumes in advance.
There were even discussions as early as December 2012 regarding the turnarounds, with some buyers keen to cover themselves.
The benzene market is expected to remain bullish on limited feedstock availability, which will keep upward pressure on styrene, even if offtake from key markets such as construction remains slow.
Styrene spot numbers are already starting to move back up after opening wider for January at $1,630-1,665/tonne FOB (free on board) Rotterdam. Bids gradually rose again to $1,660/tonne, while offers approach $1,700/tonne.
"The market is very quiet," said one source, adding that it seemed "directionless". Offers for January and February were up at $1,690/tonne in line with benzene, but were yet to be met with firm bids.
One styrene trader quoted $1,680-1,710/tonne for March, an indication the European market is likely to continue on an upward trajectory for the first quarter.
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