Olefins supply in Europe is expected to lengthen slowly even as bullish crude oil complex is expected to boost spot prices.
OLEFINS
As a result of improving supplies, the spot discount to the contract price for all olefins -- ethylene, propylene and butadiene -- is seen widening. The November contract price for monoethylene glycol was settled down Eur20/mt from October at Eur930/mt reflecting a bearish market.
POLYMERS
Good monomer availability and strong run rates among producers, coupled with low offtake in October, has led to ample polymers supply in Europe. Higher inventories has meant that end-users could be looking forward to extra purchases to cover their needs till the year-end. Polyethylene and polypropylene are both seen as bearish while polyvinyl chloride is stable.
The only polymer behaving different currently is polystyrene. Rising feedstock prices and an anticipated tightness in European styrene supplies is likely to strengthen PS producers' negotiating position this week. Those who settle PS contract prices later in the month are unlikely to get a full pass through of the Eur90 monomer decrease. Expandable PS order books are now closed for November, and producers seem to be enhancing their margins.
AROMATICS
Styrene imports from the US are likely to decrease amid reduced run rates on the other side of the Atlantic and increasing imports from Asia. Styrene forward pricing has been buoyed by tight supply concerns as turnaround season in Europe is set to start in January. This has led the November-December contango market structure to widen.
After touching peaks of above $900/mt CIF ARA, benzene prices have edged lower as short positions have been potentially covered across the Atlantic. It remains uncertain whether the European market can hold its ground this week or face further bearish pressure.
With the supply front continuing to be replenished for toluene and mixed xylene, it remains to be seen whether spot trading could gain momentum as most buyers have so far taken the back seat, holding bearish views on prices. Paraxylene and orthoxylene markets are currently seen well supplied and November contracts for both these products are to settle this week.
INTERMEDIATES AND MTBE
Caustic soda stocks continue to fall in Europe amid tight supplies and the approaching EU deadline banning mercury-based production of chlorine/caustic soda.
The recent bullishness in the European methanol market is likely to continue into this week amid ongoing demand from several buyers. The rising prices in Europe have helped narrow the gap with Asian markets but prices in China remain at a premium.
Weakness in blending demand as well as a lack of export opportunities have pushed MTBE's factor to gasoline down to a more than three-year low with no signs of change in direction. The short-lived arbitrage to the US is likely to remain closed this week.
