Europe styrene spot picks up amid renewed demand

Focus article by Truong Mellor

LONDON (ICIS)–European styrene spot pricing has seen some upward movement over the course of this week, sources said on Thursday, supported by higher Asian numbers as well as some renewed demand.

January spot levels opened the week at $765-780/tonne FOB, and a deal was done at $772/tonne. Another deal for EU origin material was later heard at $785/tonne.

As the week progressed, January traded several times at $795/tonne before bids and offers tipped over the $800/tonne mark.

By Wednesday 21 January, there was a deal for the current month heard at $810/tonne and bids climbed up to $840/tonne before a deal was done at that level. February remained in contango at $850-890/tonne, and later traded at $865/tonne.

This morning, spot numbers for January were at $800-860/tonne, with a wider range emerging amid some uncertainty whether the pricing upturn this week was structural. February remained in contango at $840-870/tonne while March was higher still at $845-890/tonne.

“Styrene demand is looking better right now,” said one distribution market source. “We are seeing more enquiries, and people are looking for so-called ‘cheap’ material. The market appears to be stabilising, which we needed to stimulate buyers.”

With styrene consumers running stocks low from late 2014 onward, this was starting to support some upward movement in the European bulk market.

November 2014 saw almost 115,000 tonnes of styrene arrive into the EU, according to Eurostat figures, with several regional outages pulling material into the ARA region. This saw spot numbers subsequently plummet (see graph).

“[The eurostat figures for November 2014] explain the dramatic fall from grace,” said one styrene trader. “But today it feels like most of it has been moved, and now we need to look ahead.”

One factor to consider for the coming weeks is that with the Asian styrene market still comfortably priced higher than Europe, this will be pulling US and Middle East exports away from the ARA region.

Chinese styrene spot numbers have firmed recently, although one source in the region felt this was primarily due to squeezed production margins rather than any structural improvement in the market.

There has also been talk of European suppliers looking to move material into markets such as Turkey, Egypt or even Brazil.

“With the current euro exchange rate against the US dollar, Europeans might be quite competitive actually,” said one source.

With the traditional peak construction season in Europe towards the end of Q1 drawing closer, this is also likely to support demand for styrene.

Nevertheless, with the outlook for ethylene still bearish and the February benzene contract likely to see another decrease (albeit not of the same magnitude of the €201/tonne reduction for January), players are expecting some further downward movement on the styrene barge settlement for February.

The strength of the US dollar against the euro will also mitigate any decrease in euro terms.

European benzene spot levels continue to hover around the $600/tonne CIF (cost, insurance and freight) ARA mark so far this week, with several deals done on either side of this level, perhaps reflecting a growing stability in the crude oil market at just below $50/bbl. 

However, no clear direction has yet to emerge this month, with derivative demand still tentative in the anticipation of further downward movement on pricing.

“There’s not much change there,” said one benzene trader. “The market feels a bit better on the buy side, but it is all just trade going back and forth right now.”