Price and market trends: Europe styrene faces upward pressure amid slow demand

24 July 2014 11:23 Source:ICIS Chemical Business

Downstream styrenics demand is poor but there is continued upward pressure from feedstock benzene

European styrene prices are edging higher this month amid some upward pressure, despite sluggish derivative demand and continued bearish signals from Asia, sources said on 22 July.

July spot deals were done as low as $1,618/tonne FOB (free on board) previous week before recovering, with both July and August trading at $1,640/tonne on Friday 18 July.

Bids and offers so far that week had edged up to $1,640-1,660/tonne, with a July deal done on Monday 21 July at $1,643/tonne.

While there is continued upward pressure from feedstock benzene, which continues to hover around the $1,500/tonne level, downstream styrenics demand remains slow amid a bearish outlook for the coming months.

“We saw a strong Q1 and the winter period earlier this year, with demand brought forward because of the good weather,” one expandable polystyrene (EPS) producer said. “But now June and July have been very weak.”

As a result, there are downstream market players who believe that demand in the styrenics chain will remain slow at least until September 2014.

Likewise, there is no upturn on the horizon in the Asian styrene market, despite some upward pressure from benzene. Chinese inventories remain high, and resin demand has yet to show any major signs of recovery.

While the arbitrage window from the US into Europe is now closed, some sources felt that there were ample imports still making their way into the region from across the Atlantic.

Although there has been no notable pressure on regional availability this month, there is a sense among some that this could change.

Turkey, Egypt and eastern Europe have been pulling on Amsterdam-Rotterdam-Antwerp (ARA) volumes this month, some players felt, with a combination of strong demand in some markets and lower Russian styrene output creating pockets of tightness.

This could help support some upward movement on pricing, particularly if there is some recovery in Asia which diverts US export cargoes away from Europe, but the styrene market still has significant head room.

But with benzene structurally tight and likely to maintain strong pricing levels in tandem with the US market, European styrene pricing continues to face significant pressure on production margins (see chart), a far cry from 2013 and the ample benzene/styrene spread seen through much of the year.

Towards the end of last year, there was a sense among some players that the market had fundamentally changed with regards to the spread of styrene over benzene, but so far 2014 has proven this wrong.

Concerns about availability plaguing the European styrene market throughout much of 2013 saw many players look to the US for material this year. Combined with lacklustre derivative demand, this has kept regional supply ample so far in 2014.

By Truong Mellor