Europe styrene spot drops alongside Asian downward pressure

LONDON (ICIS)–The continued downward movement on spot pricing in the European styrene market has squeezed the spread over feedstock benzene so far this month, sources said on Tuesday.

Following the €245/tonne reduction on the May styrene barge settlement earlier in the week, European spot numbers continued to ease lower amid some prompt length and sluggish demand. May traded as low as $1,010/tonne several times on Friday 5 May.

Benzene spot numbers were also lower towards the end of the week, with a slump in crude oil prices pulling May spot levels down to $780/tonne.

With the benzene/styrene spread moving below $250/tonne, however, some styrene players subsequently felt that this could start to see a reversal of the downward trend on pricing as producers trim back output rates.

“The numbers are very low compared to benzene,” said one styrene trader on Monday. “The lower styrene barge number should see more demand this month, and the drop in the spread means we could see some industry support in the spot market emerge.”

Styrene spot levels did start to bounce back initially this week, with May opening the week with bids at $1,020-1,025/tonne and offers edging back up to $1,045/tonne. After trading late last week at $1,030-1,035/tonne, June remained in contango on Monday 8 May at $1,035-1,050/tonne.

However, May spot numbers on Tuesday morning were lower, as Asian bearishness weighed on domestic pricing. Bids for May were at $1,000/tonne while offers were at $1,025/tonne, but these were initially as low as $1,015/tonne.

June bids were also at $1,000/tonne on Tuesday morning, with offers at $1,020-1,030/tonne, and there was talk of deals done at $1,015/tonne and $1,020/tonne pending further confirmation.

With styrene prices in Asia now around US levels plus freight costs, this is putting pressure on Chinese producers to trim back operating rates. A deal for June was done earlier today at $1,010/tonne CFR China.

One styrene trader in Europe said that it is anticipating prices to drop below $1,000/tonne this week: “Bids are probably going to be around $200/tonne over benzene, while offers at $225/tonne above [benzene prices].”

May benzene saw spot offers at $790/tonne and no firm bids this morning, in line with some downward movement in the US earlier today. June was backwardated with offers at $775/tonne.

The European benzene/styrene spread soared earlier in the year at around levels of $600/tonne, with a bullish Asian market and some unplanned US outages pushing up global prices in February 2017.

However, Q2 has seen a downward correction on European styrene numbers. Asian styrene consumption has remained slow, and European availability has proven healthy despite the various production outages.