Europe styrene market stagnant amid benzene bearishness
Truong Mellor
20-Mar-2013
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)
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