FocusEurope styrene direction unclear for September

19 August 2013 10:34  [Source: ICIS news]

By Truong Mellor

DirectionLONDON (ICIS)--The outlook for the European styrene market ahead of September is mixed, players said on Monday, with ongoing bullish sentiment in Asia likely to play a key role in domestic price direction.

European spot activity was thin last week owing to the summer holiday period, although prices did see some upward movement initially amid renewed buying interest and an upturn in feedstock benzene.

August deals were done as high as $1,760/tonne (€1,320/tonne) on a FOB (free on board) basis but spot values subsequently edged back down as the week progressed, with a deal done on Friday 16 August at $1,730/tonne for August delivery.

European spot values opened this week with August offers at $1,735/tonne and no firm corresponding bids.

The European spot market had previously moved as high as $1,810/tonne FOB Rotterdam in July, as production outages and a bullish Asian styrene sector pushed prices upward.

However, offtake from key derivative sectors remains fundamentally weak amid wider macroeconomic uncertainty. European polystyrene (PS) prices have edged up in tandem with the monomer increase, but many consumers feel that the price hikes are having a detrimental impact on market recovery and demand.

“There have been no real improvements in the market,” said one downstream source last week. “We saw styrene prices supported by benzene gains a little, but it is the global supply issue and the Asian influence that will be key next month.”

While one source in the European distribution market is expecting styrene costs to come down in September, there remains a question mark surrounding availability and how the Asian market will unfold in the coming weeks.

“There are already lower FCA (free carrier) numbers for the second half of August, although availability is still balanced,” the source said. “If the Asian styrene price stays around $1,800/tonne, however, this will limit the downside in Europe.”

There is also some expectation among traders that September will see more bullishness on spot pricing, at least for the first half of the month, as Asia pulls US exports away from Europe.

“September could be tight again in Europe,” one trader said. “With industry back up and operating the market may see a price increase as in the first half of August.”

Coupled with the potential for increased derivative offtake following the August holiday period, with players returning to the market en masse, this could translate into more tightness for Europe and continued bullishness on pricing.

“Asia is pulling US material,” said another trader. “There are no US imports coming into Europe for the first half of September. The second half of the month will depend on how prices in Asia will look.”

The Asian spot market saw some downward movement last week, with rising concerns about whether derivative markets could absorb any further bullishness on monomer pricing. The expected arrival of deep-sea imports in the coming weeks also weighed down on Asian spot values.

($1 = €0.75)

By: Truong Mellor
+44 208 652 3214

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