Market and product

European styrene spot numbers increased sharply towards the end of the last week, sources said on Monday, with some upcoming turnarounds both in Europe and abroad putting upward pressure on the market.

Spot prices were largely steady for most of the week within a range of $860-900/tonne FOB (free on board) before rising on Thursday 11 February. Bids for February rose to $880/tonne before a deal was done at $885/tonne.

By Friday afternoon, current month pricing moved above $900/tonne and a February deal was done at $935/tonne. February was valued at $910-950/tonne towards the end of the day while March was in contango at $915-955/tonne. April was higher still at $930-975/tonne.

One styrene trader said that some of the upward pressure was coming from lower PO/SM (propylene oxide/styrene monomer) production output. Nevertheless, there were mixed ideas about whether this was widespread through the European market. Some sources felt that glycol demand was still healthy, but conceded that at least one major unit was operating at lower rates.

"Look at the weather," said one downstream styrenics producer. "There isn't any demand for de-icer. We are also seeing one producer selling benzene, so the PO/SM unit is obviously not consuming it."

There were also lower inventories and healthy derivative demand supporting the upward movement in Europe. Combined with some exports out of the region to Asia, this is helping redress some of the supply overhang seen earlier in 2016.

"The problem is that once the length gets soaked up it's gone," said one styrene consumer. "It can't get replaced quick enough."

Forward looking sentiment also remains positive due to some planned styrene turnarounds in both the US and Asia. With the traditional peak season for styrenics and the construction industry also on the horizon, this could potentially squeeze availability in Europe.

Despite the upturn for February, several European players were uncertain whether current numbers were sustainable. With the restart of the Ellba unit in Moerdijk last month, some traders believe that there was still length in the styrene market.

“It seems to be an extreme reaction,” said one source. “The contango into April makes sense looking at the turnarounds in Asia and the US, but February seems too high now.”

PS (polystyrene) producers have reported strong demand since Q4 last year, but there is the possibility that the higher consumption levels seen over the traditionally slower winter season could have an adverse impact on future buying interest given the fragility of the wider economy.

Nevertheless, with talk of at least two European production outages from March onwards, and fewer imports arriving from the US Gulf, this could keep the upward momentum going.

“The best offer for April is $975/tonne,” said one styrene trader on Friday 12 February. “Which means if you have spare tank space, $935/tonne for February is a bargain if prices stay firm. Of course, that is not guaranteed.”