London (Platts)--18Jan2013/717 am EST/1217 GMT

The arbitrage window for styrene monomer from the US Gulf Coast to Europe has opened up due to a widening contango in the FOB ARA market.

At least 11,000 mt of styrene monomer has been heard headed to Europe from the US as the arbitrage window this week after being closed on paper for most of the first half of January, according to Platts data.

Two January deals were done Wednesday, reported to Platts Thursday, at 74 cents/lb ($1,631.40/mt) FOB US Gulf Coast for 4,000 mt and 74.75 cents/lb FOB USG for 2,000 mt, while a February deal was reported post-assessment window Friday at 76 cents/lb FOB USG for 5,000 mt. All of the product was headed to Europe, sources said.

US styrene was assessed up 0.40 cents/lb Thursday at 74.85 cents/lb FOB USG ($1,653/mt), tracking higher feedstock benzene prices. The FOB ARA benchmark was assessed at $1,695/mt Thursday -- $42/mt higher than US prices, while freight costs were pegged at around $55-60/mt.

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According to market sources, traders were taking position in light of a widening contango in European styrene. While the key assessed laycans of January and February remain under freight parity to the US, March and April product were trading at a $10-20/mt premium to February, with expectations that prices at the back-end would rise further.

Bullish sentiment in Europe were founded upon a heavy turnaround season that centered around the second quarter of the year.

Shell will be shutting its 450,000 mt/year styrene plant at Moerdijk in March for six weeks, Styrolution will shut its 500,000 mt/year styrene plant at Antwerp for two months, LyondellBasell will shut its 640,000 mt/year styrene plant at Maasvlakte for six weeks and Repsol plans to shut its 450,000 mt/year Tarragona styrene plant for 40 days.

Industry sources say that the supply crunch will be most pronounced in April-May because that is when styrene demand is expected to pick up as well.

In preparation for the impending perceived tightness coming up from March, market participants have been fervently building up inventory, and spot trades for the January/February and February/March timespreads have increased as market participants seek to roll the current surplus in the prompt months to March and April.

"It's mostly rolling by traders, people want their length to be in March/April, that is the whole game," said a trader Wednesday.

Meanwhile, the arbitrage window from the US to Asia remained closed on paper Thursday. Benzene sources in the US said benzene, which has risen 20 cents since Tuesday, assessed at 491 cents/gal ($1,468.09/mt) FOB USG Thursday, has climbed in part due to belief that styrene demand in February would pick up. Styrene sources said unless an arbitrage window to Europe or Asia remained open, styrene demand could not rise.

The US is a net exporter of styrene, industry sources said. According to Platts data, with European styrene for February assessed at $1,710/mt FOB ARA Thursday and freight at $50/mt, US styrene would need to be at or below 75.30 cents/lb FOB USG to work the arb.

--Jeremy Rakes, Jeremy_Rakes@platts.com
--Michelle Ho, Michelle_Ho@platts.com
--Edited by Jonathan Dart, jonathan_fox@platts.com

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