Europe styrene buyers react to August contract price increase

LONDON (ICIS)–Following the August styrene barge contract settlement at €1,457/tonne ($1,917/tonne) FOB (free on board) ARA (Amsterdam-Rotterdam-Antwerp) – an increase of €47/tonne from the previous month – downstream players are concerned about the impact of monomer pricing on demand.

Several end users and consumers expressed surprise at the magnitude of the increase, with some expecting a smaller upward movement of around €20/tonne, and even a rollover in some cases.

An increase had been predicted by others this month, however, as prices saw sizeable gains throughout July and into August on availability concerns amid production outages both in Europe. In addition, a Russian supplier went offline, which pulled more material out of the ARA market in July as it tightened availability in the Nordic region.

“If styrene starts to lengthen in August, it is in real danger of collapsing,” said one major European consumer, who nonetheless saw the logic behind the €47/tonne increase.

“The market is still very tight,” the consumer explained. “Producers may have to step into the spot market, so they wouldn’t want to pay these high numbers if the [contract price] CP figure is relatively low.”

Indeed, opinions as to whether styrene prices will maintain these high levels largely depend on whether producers will be active in the spot market.

One downstream styrenics producer noted that, while the high pricing for the monomer in Europe was not helping derivative markets, prices in the region were not significantly higher than either Asia or the US.

“The problem is that markets aren’t strong enough, not the cost of raw materials,” the source said. “Consumer pricing does not move with petrochemical pricing, so 5-10% increases on styrene aren’t crucial for downstream demand.”

For many, the real fear is the spread between naphtha and styrene, which has widened to what many feel is a threatening level at around $900/tonne, as any macroeconomic downturn could see styrene prices sharply react to upstream losses.

“The real scary thing is everyone operating hand to mouth,” said one European styrene consumer. “Buyers do it, so now producers have to do it as well. It’s the only way. We all got it wrong this year around the time of the shutdowns, when styrene prices were at their lowest. So everyone is being very careful.”

($1 = €0.76)