Europe May benzene CP likely to rise, styrene to resist upward trend

30 April 2013 09:59  [Source: ICIS news]

LONDON (ICIS)--European benzene players are braced for a sizeable increase on the May contract price, sources said on Tuesday, in tandem with the upward surge on spot values. However, the downstream styrene market looks set to resist any major increase on the May barge contract as end users struggle with slow demand.

April saw benzene spot levels make significant gains, as players who had previously gone short looked to cover positions for May.

While there was uncertainty about what was driving the upturn among some downstream sources, benzene traders and suppliers argued that production output had been curtailed throughout the first quarter of 2013, owing to low prices amid weak end user demand.

The upward surge for benzene in April was particularly strange for many in the market as it was moving against the tide of oil and energy futures, which saw a sharp plummet over the same period amid concerns surrounding Chinese growth.

There was talk of May deals done as high as $1,430/tonne (€1,087/tonne) CIF (cost, insurance, freight) ARA (Amsterdam-Rotterdam-Antwerp), and while the bull run briefly subsided last week, deals for May delivery have already been done this week at $1,385/tonne.

The European benzene contract for April was settled on 31 March in US dollar terms at $1,267/tonne FOB (free on board) NWE (northwest Europe), and the outlook for April was initially bearish given the lower offtake from both the styrene and phenol markets.

Despite a likely triple-digit increase for the May benzene number, downstream styrene players are set to resist any upward movement in line with feedstock as demand in key end use sectors still fails to gain any traction.

One major consumer said that regardless of the benzene settlement, it is pushing for a small reduction on the May barge contract.

“The markets are still impossible downstream,” the consumer added. “Styrene stocks are high and this current blip on benzene can easily fall away.”

There are many in the market who are expecting the bullishness on benzene to ease off, as the spread with naphtha at around $600/tonne is unstable in the medium to long term.

Another styrene player echoed these sentiments, arguing that the styrene contract price should reflect the real market and not the inflated benzene stock.

“End users say producers took much premium pricing in the months prior to the styrene shutdowns and now it is time to hand this margin back,” the source explained.

The May ethylene contract was also settled at a €100/tonne decrease, which is likely to temper any potential upward movement on styrene.

($1 = €0.76)


By: Truong Mellor
+44 208 652 3214



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