Market participants are expecting the global styrene market to stabilize in September, following a turbulent summer, but turnarounds still on the agenda in Europe and Asia amid a typical pick-up in demand from the seasonal summer lull could tip the market into a bullish mode next month, according to sources.
The European styrene price fell to a two-week low Monday of $1,174/mt, while the CFR China marker price has been trending in a range of $1,150-1,180/mt in the past two weeks, stabilizing from earlier spikes during the summer.
The European styrene market faced a summer of discontent as unplanned outages led to soaring prices. Most recently, utilization rates at Ellba and Shell's POSM units at Moerdijk plummeted, following the fire at Shell's Pernis refinery, leading to tight product availability in Europe.
The European spot price reached $1,302/mt FOB ARA on August 2, a 19-week high at the time.
In Asia, there were bouts of increases during the summer driven mostly by sentiment, which quickly lost momentum. This included a vessel collision at East China's Changzhou Huarun Petrochemical terminal on July 9 and an outage at Hanwha Total's 400,000 mt/year plant in South Korea.
However, slow buying interest, coupled with rising styrene inventories pressured down Asia prices. Inventories in East China rebounded to 50,200 mt on August 11, after falling to a six-month low on July 28, S&P Global Platts data showed.
Unsurprisingly, this meant the recent plant outages and supply concerns in Europe had little impact on a lengthening Asian styrene market.
US FILLS SUPPLY GAP
Several turnarounds are planned in Asia and Europe for the rest of Q3, but the supply gap is expected to be filled with imports, primarily from the US.
In Europe, LyondellBasell and Covestro's Maasvlakte propylene oxide styrene monomer unit is expected to start "preventative maintenance" in August or September, sources said. The turnaround was previously scheduled for early August, but was postponed to ease supply tightness in Europe in early August.
The POSM unit has a styrene capacity of 640,000 mt/year and will be offline for about five days.
Styrolution is expected to conduct a catalyst change in September at one of its smaller lines at its 500,000 mt/year Antwerp complex. A catalyst change typically lasts two to three weeks.
Versalis' 400,000 mt/year Mantua unit will also be down for 55 days between September and October.
In Asia, Taiwan Formosa Chemical & Fibre Corp. plans to shut its 250,000 mt/year No. 1 and 350,000 mt/year No. 2 plants at Mailiao for maintenance of around 20 days from mid-September.
In addition, South Korean producer LG Chem plans to shut down its 180,000 mt/year styrene monomer plant at Daesan for maintenance in October for three to four weeks, which may lead to increased buying interest in September.
More than 60,000 mt of imports are expected to have arrived on European shores by the end of August, while more cargoes are on the way for September, sources said.
Imports of more than 30,000 mt were heard booked in H1 August from the US Gulf heading towards Europe, for arrival in September. The import arbitrage has been open since early June.
Similarly, Asia has attracted US cargoes due to impending turnarounds and low inventory levels throughout the summer season, with the arbitrage open through June-July.
The expected loss of around 47,670 mt of styrene from Formosa and LG Chem is expected to be filled by around 35,000-40,000 mt of imports from the US, expected to arrive in late September, industry sources said.
The spread between styrene and benzene has remained healthy at above $350/mt in the US, which supported high utilization rates there. In addition, no major turnarounds are expected in the US, with Westlake postponing maintenance from Q4 2017 to Q1 2018, leading to ample US supply for the rest of the world.
KNOWN UNKNOWNS
Despite imports from the US into Europe and Asia compensating for outages, several known unknowns could turn the September market bullish, according to sources.
In Europe and Asia, demand is expected to strengthen in September, typical for the season. Polystyrene demand slowed marginally in August in Europe, but uptake is expected to rise in September.
ABS demand is expected to remain strong through August-September, sources said. Several sources are predicting PS and ABS demand levels to be higher than usual in Q3, making up for poor demand in Q1. Low imports of PS and ABS on a year-on-year basis into Europe mean increased reliance on European PS and ABS producers.
Versalis' downstream styrenics units are expected to continue operating despite the outage in feedstock styrene. A combination of tight European supply during the summer and several minor issues in the Middle East have led to concerns about whether the full supply gap from Versalis' outage can be filled in Europe.
If imports are not enough, there may be additional pull from the Mediterranean for product fro the Amsterdam-Rotterdam-Antwerp hub, a trader source said, which would turn ARA prices bullish in September.
Market participants also expressed concerns about other works at European major sites that are yet to be confirmed. Several periods of tightness in Europe this year have meant high utilization rates at styrene plants, which could lead to minor works that are not known yet.
In Asia, despite the recent recovery in inventories, stock levels remain low vis-a-vis last year. Current stock levels of 50,200 mt are sharply lower than the 74,000 mt a year ago, a fall of 32.2%.
In addition, the arbitrage window into Asia has been shut on paper since August, with Europe providing a better netback for US origin exports at the moment. This could lead to a lower-than-expected volume of deep-sea cargoes being delivered into Asia for Q4 compared with previous years, industry sources said, providing an upside to prices.
Furthermore, Qingdao Soda Ash Industries in China's eastern province of Shandong, which was originally slated to start commercial production at its new 500,000 mt/year styrene monomer plant by the end of September, may now push back production to next year, industry sources said this week.
As Asia's largest styrene expansion in 2017, the delay in Qingdao Soda Ash's new capacity will likely provide further support to Asian prices for Q3 and beyond, and knock-on effects to global sentiment.
