Europe styrene market braced for CP increase in August

31 July 2013 11:54  [Source: ICIS news]

LONDON (ICIS)--Bullish European styrene spot numbers throughout July and into August have kept upward pressure on the market ahead of the monthly barge contract settlement for August, sources said on Wednesday.

There has been talk among players that sellers are pushing for increases of anywhere between €35-70/tonne ($47-93), and even talk of higher numbers.

“The number will go up in August,” said one consumer. “Benzene will be done around $1,250/tonne, and ethylene is likely to go up by €40/tonne. Spot has been tight through July, and weak PO (propylene oxide) demand has meant less output and less styrene.”

PO/SM (styrene monomer) units produce approximately 2 tonnes of styrene for every tonne of PO. One downstream player estimated that styrene derived from PO/SM production accounts for around 20% of Europe’s annual nameplate capacity.

“If PO is running at 60%, the styrene market loses around 900,000 tonnes annually, about 20% of Europe’s supply.”

July saw spot deals done as high as $1,810/tonne as players looked to cover themselves amid availability restrictions. Shell declared force majeure on styrene at its Moerdijk site in the Netherlands early in the month, while other European producers and one Russian supplier have also faced technical problems that have limited production output this month.

“We saw about 5,000-6,000 tonnes move out of Europe in July for the Nordic region, which is usually covered by Russia,” said one trader.

There has been no official comment from Shell regarding the lifting of force majeure at the Moerdijk site, although several downstream consumers have said that it is expected to be up and running by the first week of August.

One other European producer confirmed that its unit, which had been facing technical problems this month, was now back up and running.

Combined with the expected arrival of imports from the US by the second half of August, availability in Europe is likely to improve. This is already evidenced by the lower numbers for the second half of the month and September, which is sharply backwardated.

July and August have seen offers steady around the $1,800/tonne mark for much of the past month, although some of this bullishness has started to ease this week, with an August range of $1,750-1,760/tonne FOB (free on board) Rotterdam heard.

Nevertheless, players are braced for further ongoing bullishness on the August barge contract.

“Asia is still very strong, with numbers around $1,800-1,850/tonne CFR [cost & freight] China,” explained one source. “If Europe moves too low, this could always pull material from the region, so the market has to keep pace a little.”

Several players have raised concerns about the potential impact on derivative demand should the August number for the monomer go up further.

“If the contract settles above €1,450/tonne for August, that’s when we expect to see significantly lower demand,” said one styrene buyer. “The problem is that consumption really has to drop for the styrene market to get the message.”

The July barge contract was agreed at €1,410/tonne FOB ARA (Amsterdam-Rotterdam-Antwerp), a reduction of €4/tonne from the previous month.

($1 = €0.75)

By: Truong Mellor
+44 208 652 3214

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