Some product is reportedly moving to Europe and South America, via intra-company shipments and some unconfirmed trader movements. Although spot benzene has moved to levels approximately 25 cents below the monthly contract price, the spot ethylene price have surged relative to its most recent contract settlement. As a result, styrene production economics using feeds priced at their respective monthly contract levels are $0.002/lb. lower than those priced at current spot prices.
Recently release trade data show that U.S. styrene exports for the first half of this year have totaled 853.1 KT, an increase of 35.6% over the same period of 2011. Exports to Mexico have increased by approximately 50 KT. On a percentage bases, the largest increases were in shipments to Asia and Western Europe. Exports to Asia increased from 111.2 KT in 2011 to 194.4 KT (+74.8%) this year, and exports to Europe increased from 76.2 KT to 142.7 KT (+87.3%).
In the domestic market, logistics bottlenecks continue to capture most producers’ attention. Low water levels on the Mississippi River have delayed some inflows of raw materials, and in at least one location, forced a producer to load styrene barges well below capacity, due to low draught level at its loading dock. More broadly, Mississippi River traffic has also been slowed and equipment rotations have been lengthened, leading to further scheduling complications. The industry lacks supply alternatives, as inventory through most value chains was already at critically low levels, and railing product in from Sarnia, ON plant is impossible, since that unit is offline for maintenance.
Last year’s high water levels on the Mississippi had a very similar effect on the styrene supply chain, and inventory levels swelled along the Gulf Coast, while end users struggled to run at minimum rates due to lack of monomer.
Trade has been active, with prices rising from $1535, done for September early in the week, to $1585, done for August on Thursday. Prices for the two months have been closely correlated. Much of the activity is intertrade, but producers were again among the buyers. Demand continues to surprise, though it must be assumed that there is an element of restocking during what is normally a quiet time of the year.
A power failure in the West-Brabant region of the Netherlands on Monday affected Shell Moerdijk, causing a shutdown of the major plants on the site, which include the Ellba JV unit as well as Shell’s own SMPO plant. These two units have styrene capacities of 550 and 460 ktpa respectively. On Wednesday 15th Aug Shell stated that all plants were returning to normal operation.
The rise in prices this week has been largely in line with the increase in naphtha values, though there is a feeling that the market is tightening, with import volumes limited from both the US and the Middle East, and production generally running well below full rates.
Styrene margins over naphtha have been at or above $600 for the last four weeks, but they are also now at levels over benzene which should encourage non-integrated as well as integrated producers to begin raising styrene output.
Styrene market has been slower after 3 weeks of price increase despite firm raw material sentiment because of sluggish demand. September has decreased from $1430-$1435 FOB Korea last Thursday to $1405-$1415 FOB by this Wednesday. Import prices are also down to $1430-$1440 CFR China. October price has been talking weaker than September at around $10/mt but recovered again on Thursday and assessed at $1415-$ 1425 for September FOB Korea and $1445-$1455 for CFR China. Deals were done at CFR China for September at $1450 with a FOB Korea deal done at $1425 for same month. Rumor that one shipment from M.E Asia was delayed due to specification problem happened while loading.
China domestic price has been increased to RMB 10700 ($1416) by Thursday. That is still lower than international talking levels and inventory has further reduced to 66kt. This is lowest level this year mainly due to reduced production in China with planned turnarounds and lower operation versus steady buying from major EPS/ABS producers who want to cover with relatively cheaper material than import.
In spite of steady demand for domestic material, overall demand saw no substantial change yet due to reduced operation for PS/EPS/ABS at around 55%-65% with continuing worries over the global economy. Looking ahead, some derivatives plant started or are ready to start soon in China and it would support demand.
Korean prompt balance seems tight with one planned turnaround during August and limited import from Japan. Originally planned 30-35kt of import cargo arriving end August/early September from US seems reduced to 20-25kt due to tighter US balance and strong European atmosphere and it looks almost allocated. Additional loading on August/September from US would be almost none. There has been an operational issue from Taiwan over the weekend. Formosa #2 350kt SM line had a fire due to leakage from pipeline and the plant shutdown after the fire. There was no substantial damage, but FCFC will need to wait for approval from environmental authority for restart. As such, it is still unknown when the unit will actually start up. So far it has not affected spot market sentiment, but pressure will be mounting as Formosa’s #3 600kt plant also plan for scheduled turnaround from mid August for more than a month.
On economics, spread from naphtha decreased to $457 a level that is a 4 week low due to naphtha price rebound. It would prevent further production increase.