Europe styrene market stagnant amid benzene bearishness

LONDON (ICIS)–Bearish benzene sentiment and slower than expected demand ahead of the second quarter continue to weigh down on the European styrene market, sources said on Wednesday.

Global benzene prices have come under pressure so far in March, with the US market dropping to its lowest point since September 2012 earlier this week. Meanwhile, Asian spot prices for benzene also fell to a 23-week low.

“There is no arb [arbitrage window] from Asia to the US right now,” explained one European trader. “Globally, benzene is starting to lengthen and demand is not great.”

With lower demand from the domestic styrene market because of the turnarounds, and less offtake from the phenol sector amid reduced production output, European benzene availability is also looking ample.

One source also said that upstream pyrolisis gasoline [pygas] production had been ramped up, adding to the burgeoning length in Europe, although others said that there were also contradictory reports of more propane being used in the steam cracking process.

After trading as high as $1,380/tonne CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp) (€1,063/tonne) early in March, spot benzene prices in Europe moved as low as $1,220/tonne this week.

Despite this, European styrene prices have maintained a healthy spread of $400/tonne over feedstock benzene this week following a March deal done at $1,620/tonne FOB (free on board) Rotterdam, an indication that the turnaround season and subsequent availability concerns have helped temper any significant downward slide.

Bids for March were at $1,615/tonne this morning but not met with any firm corresponding offers, with sellers anticipating some upward movement.

There is some speculation among consumers, however, that concerns surrounding supply during the turnaround season may have been premature, especially now that demand from the key construction sector has failed to ignite ahead of the second quarter.

“There are imports coming into Europe, and players are having to clear stock to make way as everyone had expected spot demand to really pick up,” said one buyer. “This has led to some downward pressure on styrene.”

However, others remained positive about the outlook for styrene pricing and demand over the next few months. One source noted that while benzene in Asia saw heavy losses, this was not reflected in the styrene market, where CFR (cost and freight) prices actually edged up by $10-15/tonne.

“Stocks in Europe are still full,” said one styrene trader. “Sentiment regarding the turnarounds is still the same, although demand hasn’t seen any major improvement this week.”

However, the trader also noted that further down the pipeline, stocks are relatively empty as players have been keen to rid themselves of higher-priced inventory.

“This could mean that when demand starts to pick up, we see some more volatility on pricing,” the trader explained, adding that the spread between benzene and styrene could go as high as $500/tonne.

“The turnarounds have not really had any effect yet,” added another major styrene consumer. “A lot of derivative buyers are delaying purchasing until April, so we could see more demand and tightening supply then. Right now the market is fairly stagnant.”

($1 = €0.77)