Northwest European styrene monomer feedstock costs for December are set to rise as a bullish ethylene market is expected to outweigh stability in the benzene market ahead of the styrene MCP settlement due early next week, industry sources said.
This follows the outage of Shell's 910,000 mt/year Moerdijk steam cracker in the Netherlands in mid-November which caused ethylene spot prices to soar $173/mt or 21% from the start of the month to $981/mt FD NWE Tuesday.
While styrene production from ethyl-benzene uses approximately 0.29 mt of ethylene and 0.79 mt of benzene for every mt of styrene produced, stability in the benzene market was making ethylene the driver of styrene feedstock costs in the coming weeks.
In the benzene market, balanced demand from benzene derivatives and narrow spreads between spot and contract values was leaving substantial benzene MCP movements for December unlikely.
NWE spot barges for delivery 5-30 days forward were assessed at $642.50/mt CIF ARA Tuesday, putting the spot market at a $6.50/mt or 1% premium to the November MCP of $636/mt (Eur582/mt).
This is broadly similar to premiums at the start of the month when it was $6/mt and narrowing from a spread of $39/mt in mid-November, Platts data showed.
Furthermore, spot benzene trades concluded during the five working days prior to the contract price settlement day typically form a starting point for negotiations.
This week, traded values have been reported in a range of $630-$648/mt, with a current average of $635.75/mt, according to Platts data.
At the same time, styrene spot barge values were assessed at $903.50/mt FOB ARA Tuesday, after trades were reported in a range of $890-$900/mt this week.
This put the spot market at a 10% discount to the November MCP of Eur960/mt, from 20% at the beginning of the month.
As a result, at least one market participant expected movements in the styrene contract price for December in line with feedstock cost, leaving premiums similar to November (see table below).
This follows several months of healthy production margins in the styrene market this year when turnarounds and maintenance caused supply tightness and substantial premiums over feedstock costs in the second and third quarters.
Typically, a spread of Eur220-230/mt above feedstock costs is sufficient for standalone styrene monomer producers to break even.
It can be lower, though, if production is integrated upstream or downstream or if the plant runs on the economics of propylene oxide.
