Trade Resources Industry Views Northwest European Styrene Monomer Benchmark Has Climber $137.50/mt or 8.9%

Northwest European Styrene Monomer Benchmark Has Climber $137.50/mt or 8.9%

The Northwest European styrene monomer benchmark has climber $137.50/mt or 8.9% from a year-to-date low of $1,537.50/mt on April 22 to $1,675/mt FOB ARA Tuesday, Platts data showed.

The rally was due to a combination of increasing demand and production cuts that fed short-covering appetite by regional producers.

As the styrene premium to benzene -- a key indicator for producer margins -- sank to a year-to-date low of $140.50/mt on April 22, run cuts were triggered across the European region. Styrene producers typically require a premium of $250/mt to break even or cover costs.

From the end of April, Germany's BASF reduced operating rates at its 550,000 mt/year styrene plant in Ludwigshafen, while Styron Europe shut its 500,000 mt/year styrene plant at Terneuzen and Total has been operating its 650,000 mt/year styrene unit at Gonfreville at reduced rates on the back of unresolved production problems at its cracker.

Producers such as Styron and Total elected to buy spot product from the market which made more economic sense than to produce styrene themselves, market sources said.

So far in May, Styron was seen to have bought around 10,000 mt of May- and June-loading barges while Total had bought around 15,000 mt of spot styrene, considerably alleviating previously seen length in inventories.

Prompt demand from these two producers was also the main reason the market structure in styrene flipped from contango to backwardation on Friday.

The styrene premium to benzene has almost doubled in the same period to $277/mt as of Monday, according to Platts data.

On Tuesday morning, styrene rose $12/mt to a notional value of $1,675/mt FOB ARA on expectations of more shortcovering from the industry and market.

Bids and offers for May-loading barges were seen at $1,665-1,690/mt FOB ARA and $1,660-1,685/mt FOB ARA for June product.

Late Monday, a third producer, Styrolution, came to the spot market to buy 2,000 mt of styrene at $1,655-1,660/mt FOB ARA, market sources reported, feeding concerns of scarcity amid sustained prompt demand.

Market sources said Styrolution was also likely to be running its 500,000 mt/year styrene unit at Antwerp at reduced rates, while others said the purchase was merely for optimization purposes.

Some industry observers expressed fears that the market had been oversold especially with demand picking up further into May, but production rates should be on the rise in future.

"With Total, their problem may be compounded by the cracker outage and they don't have LyondellBasell's volumes either. My gut feeling is with what Styron and Total have done, the physical volume available isn't great and my worry is that we are oversold."

Styron plans to restart its Terneuzen unit this week, while LyondellBasell is expected to restart its propylene oxide/styrene monomer plant at Maasvlakte, the Netherlands, this Saturday, one of the company's customers said Monday.

The 640,000 mt/year styrene unit was shut from early April to the middle of May for six weeks of planned maintenance.

"Economics are not so favourable any more," said a trader.

Inventory levels in Europe are said to be fairly taut currently, given the recent drawdown, lack of imports from the US and a structurally tightented production base in comparison to 2012.

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NWE Styrene Rises 8.9% in May on Run Cuts, Producer Prompt Demand
Topics: Chemicals