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America: US domestic styrene buyers facing possible contract roll-over

https://www.chemnet.com   Jul 28,2010
US domestic styrene buyers could be facing a possible contract roll-over
from July to August, sources said on Monday, following a sharp jump in benzene
prices.


On Monday, benzene was heard bid at 280 cents/gal FOB USG for August,
with offers at 284 cents/gal FOB USG. Multiple deals were heard done at 280
cents/gal. The price on Friday was assessed at 274 cents/gal. Sources said a
fire at a Formosa refinery in Taiwan, coupled with recent production issues at
a European Dow plant, was pushing the benzene price higher.


The bid/offer range for August was about flat to the July benzene
contract price of 282 cents/gal. Following the July benzene contract
settlement, the spot benzene price fell to near 260 cents/lb, more than 20
cents below the contract price. That drop could have caused the US domestic
styrene price to fall as low as 48 cents/lb FOB USG. The July domestic styrene
price had been between 50 and 51 cents/lb.


"When spot styrene had fallen to 43 cents, the domestic buyers were
really expecting the August contract to settle near 48 cents/lb," a domestic
distributor said. "Feedstock prices were lower, so everything was pointing to
a lower [domestic styrene contract] price."


Ethylene -- with also is used to calculate styrene variable costs -- had
fallen from 32.125 cents/lb at the beginning of July to as low as 29.125 in
mid-July. In recent weeks, though, the price has rebounded to near 33
cents/lb. The last settled ethylene contract price was 39.5 cents/lb.


Assuming contracts for both ethylene and benzene settle near today's spot
values, variable costs for styrene production would be near 43.5 cents/lb. For
styrene export, producers generally seek 2.5 to 4.5 cents above variable
costs, putting the export price closer to 48 cents/lb. Domestic buyers
generally pay a 2- to 3-cent premium to the export price, which would put the
expected contract price between 50 and 51 cents/lb, flat to the July price.
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