Strong styrene increase could impact Europe PS demand in February

LONDON (ICIS)–The European polystyrene (PS) market is in the process of absorbing and assessing the significant increase in the February feedstock styrene barge contract, which exceeded €100/tonne, players said on Friday.

It is too early for clear price targets as the month has just started to unfold, but European producer Styrolution announced shortly after the feedstock contract settlement that it will be targeting increases of €140/tonne for its February business.

Even if the styrene movement was a substantial one, PS players seemed to be prepared for it, having had last year’s experience when feedstock prices were on a strong uptrend throughout the first quarter before crashing in April 2017.

The styrene spot market has been moving up in the past couple of week amid production issues in Europe, but also in the US, that spread concerns over the market’s supply.

Still, looking at its current fundamentals, the European market is well supplied with reasonable demand for this season, although customers that need to get material should be prepared to pay a certain price.

Styrene market players are not that much concerned for availability in February, but are concentrating more on March which is expected to be a more difficult month for securing material.

Meanwhile, this week, news emerged that there was an unplanned outage due to unknown technical reasons at Total’s Gonfreville cracker, according to styrene market sources.

It is not clear whether the styrene production on site has been affected as well, but styrene spot numbers exceeded $1,500/tonne on Thursday afternoon, as soon as the news was widely heard.

According to estimates, the cracker will probably be offline for a week or so and the issue does not seem to be an important one.

It remains to be seen when it will restart, while there was no official comment from Total.

Regarding the PS production at Gonfreville, no consequences have been heard so far.

PS players started sensing since early January that the styrene market might be turning more volatile and, therefore, pre-bought some volumes in order to avoid paying the higher prices.

Pre-buying activities had begun back in December, which might mean that demand might be lower in February but also March.

For some sources, January was a pretty slow month, not a weak one, but volumes were expected to be on a higher level, with PS customers preparing more evidently for the turnaround season that has began this month.

Still, PS demand has been fairly good since the beginning of the year with customers restocking material, especially when compared with the same period in 2017, when a lot of PS business was lost due to the high prices.

For the market’s short-term outlook, players think that the February styrene increase is an issue and could cause problems for their business, but it will be more harmful if another feedstock hike was to happen in March.

The supply chain needs some sort of stability, otherwise the first quarter of 2018 is very likely to turn into a repetition of the same period in 2017.

Last year’s lost ground could only be recovered through stability that would allow the European PS market to grow at a decent rate, although nothing overwhelming.