Opposing factors cloud Europe styrene direction for Q1

LONDON (ICIS)–European styrene prices have been steady-to-firm so far in January, sources said on Tuesday, with upward pressure from feedstock benzene and the US market counterbalanced by softer Asian numbers and an uncertain outlook for derivative demand.

Spot numbers for January have stayed within the low to mid $1,700s/tonne on a free on board (FOB) basis since the beginning of the year, with confirmed deals done at $1,710-1,725/tonne.

Offers for January have moved as high as $1,740-1,750/tonne, with supply constraints and the sharp gains seen on benzene helping galvanise sellers.

February has maintained a slight contango, trading last week as high as $1,730/tonne, although some players were less bullish regarding the forward month due to the expected resolution of current production issues.

“The problems at Total with strike action should be over by next month, and other producers seem to have product to sell spot for January and February,” said one styrene trader.

European demand was also described as healthy for January amid inventory restocking, with some positive signs also coming from the construction market.

“There are signs of new construction projects,” said one expandable polystyrene (EPS) producer. “It could be the bottom of the market was reached in 2013 and we have turned a corner.”

However, the producer said the current weather patterns across much of the globe and the potential impact on European activity could play a decisive role in the upcoming weeks.

In the US, styrene prices have been pushed up so far in January by some emerging production problems, and with the upcoming Asian turnaround season predicted to absorb significant export volumes from February onwards, there is the potential for a sharp tightening of global availability.

However, the Asian styrene market has seen prices soften by $25-30/tonne across all regions over the last week, in line with some benzene losses and a slowdown in trading activity ahead of the Lunar New Year holiday in late January.

Poor demand from the styrenic resins sector combined with downward pressure on sellers due to the arrival of imports also weighed down on sentiment this month.

Shipping rates from the US Gulf into Asia saw a decrease, the first in over six months, also an indication of sluggish petrochemical demand from the key Chinese market.

This has raised some concerns that the turnaround season in Asia and subsequent bullishness predicted earlier may have been overdone, something which similarly plagued the European market early in 2013, although for many players it was still too early to determine whether the current price erosion in Asia would hold.

Others were still prepared for a global squeeze on styrene availability later in the first quarter.

“The issue in Asia right now is the run-up to the New Year holiday,” said one European seller. “Nobody is looking to build stock ahead of that, but February will be a different story.”