Corrected: Europe styrene facing upward pressure as Q3 unfolds
Truong Mellor
09-Jul-2014
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
LONDON
(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.
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