Europe styrene market poised for sharp drop in July contract

Truong Mellor

29-Jun-2016

Europe styrene market poised for July contract fallLONDON (ICIS)–Falling styrene spot prices over the course of June is likely to support a sharp decrease on the upcoming July contract settlement, sources said on Wednesday.

Following a delayed restart after a period of planned maintenance shutdowns over May, spot numbers spiked above $1,200/tonne FOB (free on board) towards the end of the month which saw the July barge settlement agreed at an increase of €60/tonne.

The increase shocked many derivative players, who saw the bullishness at the time as a brief squeeze on prompt availability that was not representative of overall market fundamentals.

As a result, downstream players have been said to be holding back on purchases in June, as next month is expected to see considerably lower styrene costs.

There was a subsequent drop in spot pricing as June unfolded. Current spot indications around the $1,000/tonne FOB level would support a triple-digit decrease for the July barge settlement.

However, one styrene trader said that it was seeing reasonable demand in the distribution sector.

“The euro is helping, but some uncertainty about the July contract is holding folks back,” the trader explained.

With benzene numbers holding relatively steady around the June contract price level this week, the benzene/styrene spread remained structurally high despite the improved availability for styrene emerging as US imports arrive.

“Benzene is not a factor, it is that simple,” the trader added. “If this was a spread-based market we would be at $850/tonne. Demand seems actually quite good here, and Asian numbers make sure we can’t go down.”

Asian spot numbers edged back above $1,000/tonne FOB Korea this week ahead of the Q3 manufacturing season on the back of tightened availability in China.

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