Global styrene prices sky rocketed in the week started Nov. 8 as supply concerns in Asia, the US and EU caused a run on pricing, supported by firming market sentiment following the report of advancements in vaccine research for the pandemic, as well as strong downstream styrenics demand.
The tightness has been especially visible in the Asian market, causing a run on prices that has echoed into the US and Europe. But with steep backwardation in place in the Asian market moving into December, additional US or EU exports appear unlikely.
Prices surge
CFR China styrene was assessed higher by a whopping $203/mt on the week at $1,170/mt Nov. 13.
H1 December and H2 December domestic East China cargoes were assessed up $81.20-$88.40/mt on an import-parity basis. The surge is a result of tight supply in the market with unexpected turnarounds since the week ended Nov. 7 leaving supply shorter than anticipated.
In Europe, the five-to-30-days forward loading assessment for styrene monomer was last assessed at $971/mt FOB ARA on Nov. 13 -- a 13-month high for the market. This was an increase of $128.75/mt from Nov. 6.
Prompt US styrene increased $65/mt since Nov. 6 to $910/mt FOB USG on Nov. 12, also marking a more than 13-month high prior to the Nov. 13 assessment. Sources said December-loading styrene was bid at $935/mt FOB USG on Nov. 13, indicating value of prompt cargoes at least $945/mt FOB USG.
Maintenance issues
Prior to the news of unexpected turnarounds, supply appeared tight as several plants in China and Southeast Asia are due to complete annual maintenance by the close of the year, resulting in an expected dip in operating rates in the weeks to come.
Although styrene production margins have been exceptionally high, regulations require that plants complete maintenance, sources said, regardless of how wide profits may be.
European styrene production was down significantly in September and October, with two major ARA producers running maintenance works as well as another producer in the South of the continent. Recovering downstream demand for styrene saw stocks draw down more quickly than expected, and a previously long market rapidly flipped to being tight on material.
The lingering effects of hurricane season on the US Gulf Coast, which shuttered one producer for two months and led others to conduct short-lived shutdowns, have combined with the high export demand from Asia to tighten US styrene supply.
Multiple producers have already sold all material loading in November and December, sources said, despite running at near-maximum rates.
Price hike likely short-lived
The strength in Asia pricing could be short-lived, however, with supply tightness to ease after the arrival of deepsea material, which was heard delayed from November to December. This has created an extreme backwardation in the styrene market, with one saying that a backwardation of $200/mt could be possible given the tightness.
"There are no offers, the bid can be [anywhere]," one source said regarding November-arrival cargoes. Another source said there was "no choice" but to bid at such levels due to the absence of supply.
Activity in Europe has been mostly driven on the prompt, with reports of reduced run rates from a returning producer causing need for market positions to be covered in a hurry. Further talk has pointed to delayed restarts for another to December. With November dates and activity dwindling, backwardation in the market has shifted to December-January, with a $60/mt drop in bid activity seen between the two months.
