Europe benzene December CP poised for large increase

LONDON (ICIS)–European benzene and derivative players are braced for another sizable increase on the December contract, sources said on Friday, with the styrene market in particular concerned about the ongoing impact on high feedstock costs amid softer demand.

Continued buoyancy for December, as firming US numbers galvanise traders to ship cargo to the region in order to capitalise on the arbitrage, has pushed spot benzene levels comfortably above $1,400/tonne (€1,078/tonne) since the beginning of the week.

December spot material was valued at $1,410-1,425/tonne CIF (cost, insurance, freight) ARA (Amsterdam, Rotterdam, Antwerp) this morning, and has traded as high as $1,430/tonne this week.

The November settlement was made at a US dollar concept of $1,338/tonne FOB (free on board) NWE (northwest Europe), an increase of $58/tonne from the previous month.

Styrene values, meanwhile, have seen some marginal upturn ahead of December. However, the spread between benzene and styrene remains low from a production standpoint, and prompt availability is still ample.

“Benzene helped push prices up a bit midweek, but the market seems to have come back down again now,” said one trader.

December styrene traded as high as $1,575/tonne FOB Rotterdam this week, but the range was lower this morning at $1,520-1,550/tonne following unconfirmed reports that Shell have lifted its force majeure on styrene at its Moerdijk site in the Netherlands.

Despite the potential for supply disruption earlier in the month, any bullishness on styrene numbers was short-lived amid slower demand as the end of the year approaches.

The challenge for the styrene market is how to reconcile these fundamentals with the ongoing bullishness on benzene, which looks set to continue into 2013.

“It is what it is,” said one market source. “People will simply move away from styrenics overtime if benzene is such an expensive molecule.”

($1 = €0.77)