Europe styrene falters in January but Q1 outlook still bullish

By Truong Mellor

LONDON (ICIS)–European styrene prices have faltered so far in January on soft demand and upstream bearishness, but looking ahead the market is expected to firm, sources said on Tuesday.

As demand from key end use sectors struggles to pick up, partially due to the impact of high feedstock costs but also stemming from wider macroeconomic uncertainty, European styrene pricing continues to take cues from the upstream benzene market, where ARA (Amsterdam-Rotterdam-Antwerp) numbers saw some erosion last week in line with global bearishness.

“With no imports into Europe from USA or Asia, prices will have to move in line with production costs,” explained one trader.

January styrene spot deals were done as high as $1,730/tonne (€1,298/tonne) early in the month, before global benzene prices slumped. This led to some lower European numbers last week, with January styrene trading at $1,605/tonne.

Several players also noting that demand for styrenics has been softer than previously expected. As the bull run on pricing since last year had been feedstock driven, some correction was therefore inevitable once upstream costs started to slide, they argued.

However, any relief for buyers is likely to be short-lived. The market has already moved into contango, with February material now valued higher than the current month.

“We are at the second half [of January] now,” said one source. “So that’s normal.”

Nevertheless, a raft of planned shutdowns scheduled for later in the first half of the year already has some players looking to secure volumes ahead of time.

There were even discussions as early as December at the last European Petrochemical Luncheon (EPL) regarding the upcoming turnarounds, with some buyers keen to cover themselves.

Fundamentally, the benzene market is expected to remain bullish on limited feedstock availability, which will continue to keep upward pressure on styrene, even if offtake from key markets like construction remains slow.

Styrene spot numbers are already starting to move back up after opening wider for January at $1,630-1,665/tonne FOB (free on board) Rotterdam this week. Bids gradually moved back up to $1,660/tonne while offers are fast approaching the $1,700/tonne mark.

“The market is very quiet today,” said one source, adding that it seemed “directionless” so far. Offers for both January and February were up at $1,690/tonne in line with benzene, but were not met with any firm bids so far.

Additionally, one styrene trader quoted a March range of $1,680-1,710/tonne this week, an indication that the European market is likely to continue on an upward trajectory for the first quarter of 2013.

($1 = €0.75)