Europe styrene market expected to soften into June

LONDON (ICIS)–European styrene market players are expecting some downward movement in the second half of May and into June, sources said on Monday, as regional supply conditions improve and global numbers move lower.

With several European turnarounds coming to an end this month, and weaker Asian numbers making Europe a more attractive destination for US material, players are anticipating more length in the market to emerge.

However, the backwardated structure of the European market has meant that players are not holding big inventories in tanks. This is keeping some pressure on the prompt market, with several players looking to roll positions into June last week.

Some sources also felt that US imports would be limited despite the open arbitrage window, due to high freight costs as well as the backwardation into June. Availability in the US market also remains tight due to production outages in the region, and this is expected to continue into the second half of the year.

Despite this, the spread of styrene over benzene remains at a structurally high level, and derivative players have also noted that consumption levels are starting to ease off following a strong start to the second quarter.

“We have seen strong demand since the start of the year,” said one EPS (expandable polystyrene) producer. “Now it is getting a bit slower in May.”

May demand has turned softer and is below expectations, with one EPS buyer saying that demand should be good this time of the year but renovation and construction of new buildings are currently in decline.

The EPS producer added: “The third quarter could see flat or average consumption, and by the end of the year we might see more activity as demand for insulation picks up.”

May spot numbers hovered just below $1,100/tonne FOB (free on board) last week. However, the market was higher this morning amid talk of production problems at one European unit over the weekend. May was valued at $1,100-1,120/tonne while June was backwardated at $1,090-1,110/tonne.

It was unclear so far  whether the upturn on pricing this morning will have any continued momentum.