Corrected: Europe styrene facing upward pressure as Q3 unfolds

09 July 2014 11:34 Source:ICIS News

Correction: In the ICIS story headlined "Europe styrene facing upward pressure as Q3 unfolds" dated 9 July 2014, please read in the sixth paragraph ...European July contract was settled at $1,466/tonne... instead of ...European July contract was settled at $1,449/tonne... A corrected story follows.

Focus article by Truong Mellor

styrene pricesLONDON (ICIS)--European styrene spot levels have started to firm, sources said on Wednesday, with more buyers stepping into the market and sentiment for the third quarter gradually picking up after a sluggish first half of the year.

The spot market was thin as the week opened, and July bids went as low as $1,645/tonne on Tuesday 8 July before slowly edging back up to $1,655-1,660/tonne by the close of the day. Offers were at $1,670-1,680/tonne.

August continues to hold a slight contango, trading earlier in the week at $1,675/tonne. There was also talk of a July deal at this level, but this was so far unconfirmed.

By this morning, July had narrowed to $1,660-1,675/tonne while August was flat with July, although no deals were reported so far.

“The market is thin, but there is business,” one trader said. “Bids will do better. There are more traders and consumers stepping in. We feel the market will stay firm and August/September will be at $1,700/tonne and above.”

Partially this is due to higher feedstock costs, and the upward pressure of benzene in particular. The European July contract was settled at $1,466/tonne FOB (free on board) NWE (northwest Europe), which means that EB/SM (ethyl benzene/styrene monomer) producers will be looking at numbers at $1,700/tonne or higher to make production economics workable.

Offers for July spot benzene breached the $1,500/tonne mark this morning on regional tightness, with gains in the US overnight also supporting the upward momentum.

Ethylene is also starting to strengthen in a balanced market overall, with demand better than expected despite the €50/tonne increase for July.

Styrene spot numbers saw a sharp rally last week, with July prices hitting $1,680/tonne FOB, although by Friday 4 July this upturn had waned, with a deal done at $1,667.50/tonne.

With less imports arriving into Europe over the coming weeks, this is also leaving some in the market more bullish into the third quarter. There is no clear arbitrage into Europe from other regions at present, while Turkey and the Mediterranean have also pulled a large amount of US export volume as demand in those markets see a seasonal upturn.

“On top of that, Rotterdam is a bigger loss for importers,” one trader added.

The €82/tonne increase for July styrene contracts, largely driven by higher feedstock costs this month, would also support increased spot demand.

Players in the distribution market have also reported higher truck numbers so far in July, with business moving up by €30-35/tonne over the course of the last week.

One trader said it bought material at €1,255/tonne on an FCA (free carrier) basis this week, and expects demand for styrene to pick up as July unfolds.

Another potential factor for European styrene pricing is how Asia and in particular the domestic Chinese market will shape up in the coming weeks. There had been an upturn towards the end of June in tandem with benzene, but last week saw an easing of spot values amid soft demand from styrenic resins.

However, Asian manufacturing demand should start to show signs of improvement in the third quarter. Spot prices are also on a slight uptrend this week due to some plant issues in the region, although activity has been limited on a FOB Korea basis so far.

Any potential rallying in the Asian market will be felt in Europe, as higher prices there will divert export material from the US away from the ARA (Amsterdam-Rotterdam-Antwerp) region and tighten availability, with Europe being a market that is increasingly driven by supply rather than demand.

By Truong Mellor