US spot styrene margins are poised to remain flat to slightly higher following the procurement of cheaper feedstock ethylene estimated to begin in 2015-2016 as a result of the shale gas plays, industry sources said Monday on the sidelines of the American Fuel and Petrochemical Manufacturers' annual meeting.
"Cheaper ethylene could be negated by rising costs in feedstock benzene, which accounts for 70-80% of styrene costs," a large buyer said. "Margins for styrene will likely stabilize."
Coupled with lighter feeds for steam crackers, the utilization of tight oil [shale oil] yields a lower aromatic content.
Already lighter crude derived from shale oil for US refineries since 2012 has yielded a lower amount of benzene, toluene and mixed xylene, in an already net-short market.
The trend of utilizing typically light crude found in addition to shale gas in the crude slate is expected to continue as the shale plays expand, a source said.
A major styrene producer expected margins to firm up by 2016.
"The ethylene cost advantage in 2016 should outweigh any potential higher costs in benzene," a major producer said. "Expectations of higher benzene to $5/gal [FOB USG] or $6/gal [FOB USG] in the next few years is contingent on global fundamentals as well as US production."
Margins for styrene producers typically fluctuate between 2.5-6 cents/lb, according to industry sources. During first-quarter 2013, margins for styrene monomer were heard healthy, with sources estimating as high as 11 cents/lb for margins.
Spot styrene was assessed Friday at 72.05 cents/lb ($1,588.41/mt) FOB USG.
