Europe spot styrene holds steady with forward market stronger

LONDON (ICIS)–Following some upward movement towards the end of last week, February spot numbers in the European styrene market have remained fairly static, sources said on Tuesday, amid good regional availability.

The market is still in contango, with planned shutdowns in both the US and Asia expected to tighten global supply, although derivative demand and the wider economic picture both remain uncertain.

February spot numbers were starting to move lower last week following the settlement of this month’s barge contract at €925/tonne FOB (free on board) ARA (Amsterdam, Rotterdam, Antwerp), a €50/tonne reduction from the previous month.

Offers for February were initially heard at $890/tonne but there was limited buying interest and the market came down, with deals for the current month eventually heard at $840/tonne and $850/tonne FOB.

Towards the end of the week, however, there was some upward momentum in the styrene market. February traded as high as $885/tonne and the range was assessed at $875-900/tonne. The market was in contango, with March trading at $890/tonne.

February styrene was offered at $900/tonne at the start of this week, but prices gradually eased lower. Bids were seen at $860/tonne while offers were at $890/tonne.

This morning saw February offers back up at $895-900/tonne while bids were unchanged at $860/tonne. March was in a slight contango at $885-900/tonne while April bids were at $890/tonne but were not met with any offers.

Some upward movement on benzene supported the higher numbers last week, with February benzene trading as high as $620/tonne after falling to $565/tonne earlier in the week as crude oil values dropped.

There was still some upward pressure on the front end of the benzene market this morning, with bids for prompt delivery heard at $615/tonne.

Gains in the US styrene market also helped support European prices towards the end of last week. There was a growing tightness for styrene across the Atlantic into Q2 with several planned turnarounds on the near horizon.

This could have an impact on the European market in the coming weeks, supporting another surge in pricing if limited US imports are twinned with an upturn in derivative consumption towards the end of the first quarter ahead of the traditional peak summer season.

However, sources feel that there is currently enough material in the European market, with the Ellba MSPO-2 unit at Moerdijk in the Netherlands, currently running well after the restart last month. Several styrene traders said that it was running hard, with strong PO (propylene oxide) demand on the back of polyol and glycol consumption supporting this.

“The benzene/styrene spread is still fairly healthy,” said one styrene trader late last week. “This means that EB/SM units should be running well.”

There are also some planned turnarounds for late February into March in the European expandable polystyrene (EPS) market, which may free up styrene monomer availability in the coming weeks.

The spectre of crude oil volatility and ongoing macroeconomic bearishness is still keeping any price forecasting difficult. One polystyrene (PS) industry source said that it was surprised by the relative strength of benzene and styrene in the Asian market recently, but did not see it as sustainable.

“With the economic issues in China, there really isn’t too much upward pressure on the market,” the source said. “Demand there isn’t great, and I think it will be a tough Q1 overall.”

The Asian market has been quiet so far this week due to the Lunar New Year holidays, but styrene numbers were edging higher around the mid $900s/tonne on a FOB Korea basis last week on the back of lower inventories and some upcoming turnarounds in February/March.

With CFR China prices slightly higher, this created some potential for arbitrage movements out of Europe into Asia. Some traders in Europe were looking to fix eastbound exports, although some sources said timing and logistics for vessels was a challenge.

The European PS market is facing some downward pressure alongside the €50/tonne drop for the styrene barge contract this month, although availability restrictions have seen suppliers manage to resist the full extent of styrene monomer reductions since October 2015.

PS producers have reported strong demand since Q4 last year, but there is the possibility that the higher consumption levels seen over the traditionally slower winter season could have an adverse impact on buying interest going forward given the fragility of the wider economy.

Focus article by Truong Mellor