US Gulf-NWE styrene arbitrage opens as Europe's contango widens
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, firstname.lastname@example.org