Stronger Asian market pushes Europe styrene spot values up

LONDON (ICIS)–Higher pricing in the Asian styrene spot market has also pushed European values up, although it is not clear if this is the only reason for the latest surge in domestic market pricing, players said on Friday.

In China, SP Chemicals had an unplanned shutdown due to a power outage, while during restart attempts a heat exchanger issue occurred.The unit was said to be down for a week or so.

Meanwhile, the Chinese market faces a lot of conjecture around the ongoing anti-dumping duties investigation, with players wondering about the implementation process and the extent of rate changes that could eventually be imposed.

Chinese authorities began investigations on cargoes from South Korea, US and Taiwan in June 2017. The final decision will be announced June this year, but market participants are expecting preliminary results of the investigation to be made known in February.

Based on all of the above,  the European market immediately reacted with January and February trades heard as high as the mid $1,300s/tonne, although the region seems to be enjoying good availability.

Even if a stronger Asian market is usually enough to takes European prices higher, players were uncertain whether that this was the only factor in play, with some wondering if there could be some ongoing domestic production problems. However, nothing had been  confirmed by the time of publication.

This week’s price spike was also difficult to translate because benzene values have been coming down from the four-digit levels of the past couple of months, while there are no arbitrage opportunities for now as the US styrene market is lower than Europe.

In addition to that, several players seem to have covered their needs, but there was no shortage of material.

Before the Christmas holiday, people were predicting tighter supply in January, but then the arrival of US imports pushed the market lower, while adding significant length.

Therefore, the higher values could have just been driven by sentiment and no real fundamentals, something rather common in the European styrene market.

This week’s trades might be showing that players have started stressing about supply ahead of the turnaround season that will be starting in February.

Although all of the shutdowns are planned and preparations have been made, questions remain over supply for the next couple of months or so.

In a market described as fragile, demand remains healthy, although no year on year comparison could be made as the beginning of 2017 was rather particular amid consecutive and very significant price spikes.

Volumes in the European expandable polystyrene (EPS) market continue to look robust, although not as strong as in November and December 2017.

Styrene sources are confident that demand will remain strong as the month progresses because customers will choose to pre-buy material ahead of a tighter market during the turnaround season.

Outlook
Several European styrene market players are convinced that the market will not be seeing lower prices from February onwards and for a good part of the first half of the year as the widely-discussed turnaround season is about to begin next month both in Europe as well as in the US.

Supply is expected to consequently get tighter, which has initiated quite some pre-buying from the derivative markets.

On the EPS side, players are confident that demand will remain healthy come February as mild weather conditions in several European countries are helping construction, while some pre-buying ahead of the second and usually busier quarter will also take place.

Additional reporting by Deborah Lee

Picture source: Imaginechina/REX/Shutterstock