Europe spot styrene spikes amid buying interest for July

LONDON (ICIS)–Renewed buying interest and some shortness on prompt material helped drive European spot styrene prices higher this week, sources said on Friday.

Following several weeks of limited activity and a steady decline in pricing, the market saw a spike on Thursday afternoon.

July numbers had opened in the morning with bids heard at $1,250/tonne FOB (free on board) but these were not met with any corresponding offers.

However, with some buying interest seen from industry players as the day progressed, prices eventually pushed higher. Deals were done for July at $1,270/tonne, $1,280/tonne and $1,290/tonne, and offers moved up to $1,300/tonne.

“It was a market that was going to react to a bit of industry buying,” said one styrene trader. “The last few weeks have been as dry as a bone.”

By the end of the day, there were July deals talked as high as $1,310/tonne FOB, although these were so far unconfirmed. Bids for the current month opened this morning at $1,285/tonne but there were no corresponding offers.

Another trader added: “I think stocks are quite low throughout the chain. No imports volumes to be seen and operationally speaking, Europe is going back to being balanced.”

The US Gulf market has seen higher pricing on styrene since mid-April due to some production outages in the region, and this has narrowed the arbitrage spread between the US and Europe as FOB Amsterdam-Rotterdam-Antwerp (ARA) pricing gradually drifted lower since the start of June (see graph below).

However, sources in the US region reported that two major styrene units were back up and running this week, which meant that styrene production should be running at full capacity this month.

European styrene prices were bullish since the first quarter of 2015, owing largely to some planned and unplanned production outages tightening availability. However, as the units have come back on line, spot numbers started to ease over the last month.

While most sources expect the European styrene market to remain sluggish over July and August due to limited offtake throughout the summer holiday period, the dependency of the market on US export volumes means that it could remain susceptible to price volatility.

Sources in the Asian market expect sentiment and pricing to pick up towards the end of July once the manufacturing season begins. The second quarter of 2015 has been slow for Asian styrenics, and with inventories run down, this could support a strong uptake in demand ahead of the third quarter.

Similarly, European inventories throughout the styrenics chain have been run down over the last few months because of the high styrene cost. Players have opted to operate on a hand-to-mouth basis rather than build stock. With sources expecting at least one major turnaround in September, some derivative players might look to build up inventory levels ahead of this.

Focus article by Truong Mellor