Price and market trends: Europe styrene market beset by bearish sentiment

07 March 2014 10:50 Source:ICIS Chemical Business

The European March styrene barge contract was confirmed at €1,370/tonne, down €57/tonne from the previous month. The contract price was agreed on a free on board (FOB) Amsterdam-Rotterdam-Antwerp (ARA) basis.

One consumer initially confirmed it had agreed the number with a supplier. Another supplier later said it had agreed March volumes at this level with two consumers, and a second producer and two additional consumers later confirmed they had followed the settlement.

One of the consumers said: “This reflects lower feedstock costs for making styrene as well a reduction in the spot price.”

But with current March spot price levels below $1,600/tonne, many market sources felt the settlement at €1,370/tonne was high in comparison. “€1,370/tonne is equivalent to $1,650/tonne net after discounts,” said one trader. “The distributors could be having a heyday with these numbers all month.”

However, one of the producers involved in the settlement felt that the bottom of the European styrene market had been reached.

“We are sitting on the floor right now,” the producer said. “It was a mild decrease perhaps, but benzene has stabilised to an extent and the derivative markets are recovering.”

The European benzene settlement for March was been confirmed at €1,003/tonne, down €52/tonne from the previous month, as the initial settlement received further support from players on 3 March. Ethylene settled at €1,180/tonne FD (free delivered) NWE (northwest Europe), down by €20/tonne from February.

Despite the current bearishness in the European market, there is also a gnawing sense that the bottom has been reached.

The European spot market has held a steady contango on some expected upward price movement in Asia as the turnaround season in the region gets into full swing.

Some recent short covering by traders in the region and talk of production issues in the Middle East have helped stem the price decline, although downstream markets remain under pressure.

Meanwhile, limited PO/SM (propylene oxide/styrene monomer) production in Europe as glycol and de-icer demand tapers off with the milder weather will further tighten European styrene availability, especially if this happens in tandem with an uplift in demand from the construction sector for polystyrene (PS) and expandable polystyrene (EPS).

“Benzene, Asia styrene and the spot market here could all pick up by April,” said one consumer. “European PO/SM units will be running at 70% maximum by the summer, so we could see a repeat of the volatility of 2013.”

By Truong Mellor