Europe styrene to tighten but pricing will depend on benzene

By Truong Mellor

LONDON (ICIS)–Numerous scheduled turnarounds in March and April are expected to tighten the European styrene market, sources said on Monday, but it remains unclear whether this will translate into soaring spot prices.

The upcoming turnarounds have already been planned for by many in the market, with many players in discussions regarding supply for later this year as early as December at the last European Petrochemical Luncheon (EPL).

“We have been stockpiling since the end of last year,” said one downstream producer, who also noted that there were many roll deals taking place, with players keen to move their positions forward in anticipation of emerging tightness.

Styrene spot values have seen some price erosion towards the end of January as upstream benzene values continued to weaken, although traders agree that the volatility on styrene has been less pronounced.

“We actually expected January to come down further,” said one buyer. “Selling interest has been high and demand is not great.”

Spot values for February were at $1,700-1,720/tonne (€1,258-1,273/tonne) FOB (free on board) Rotterdam this morning and looked set to edge up further, but one distribution source said that with truck number around €1,350/tonne on a delivered basis, anything above $1,700/tonne was unworkable.

With styrenics demand so far failing to demonstrate any major upturn, pricing for the monomer has been largely driven by upstream benzene numbers, which have recently showed signs of weakness amid lower pricing in both Asia and the US.

While styrene availability for February is tightening, imports from abroad are expected to begin landing in Europe towards the end of next month. One trader estimated that another 15,000 tonnes was destined to arrive in March.

But despite the proactive purchasing ahead of the turnarounds, planning for the upcoming months is still difficult, as many remain wary of building large inventories in an uncertain macroeconomic environment.

In addition to the turnarounds in Europe, there are also planned shutdowns on styrene in both the US and the Middle East. Some estimates put the total capacity potentially withdrawn from the global market over March and April as high as 900,000 tonnes – almost 25% of total capacity for the monomer worldwide.

“Nobody wants to hold that sort of inventory,” said one trader. “Then you get the issue of delayed imports, so that can also lead to short spikes on pricing.”

Propylene oxide (PO) demand has slowed down in the first quarter of 2013, with one PO/styrene monomer (SM) producer seen in the styrene spot market this month, so those units are unlikely to make up the shortfall in material.

However, tightened availability on styrene may not necessarily led to astronomical prices if benzene prices are under pressure.

The removal of this much styrene production capacity from the market will free up significant volumes of benzene, and with several phenol and cyclohexane shutdowns on the horizon, this could put further downward pressure on pricing.

European benzene players have struggled to glean any clear direction in the market so far this year, with some aggressive bidding combined with global bullishness pushing prices up while better availability conversely helping bring numbers back down.

($1 = €0.74)