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US styrene price climbs following jump in European price

https://www.chemnet.com   Aug 04,2010
US styrene sellers were notionally offering between 49 and 50 cents/lb, following a $50 jump in European styrene prices. The numbers remained notional because most producers were reported sold out of material for August.


"If there was anything out there, it would have to be priced above 49 cents," one producer said.


Buyers, though, were closer to 47 cents/lb, hoping to profit from an open arbitrage opportunity to Europe. Europe traded at $1,040/mt for August, and near $1,115/mt for September. Assuming a deal done today would not reach Europe until September, the US price would have to be below 48 cents/lb to work the arb to Europe.


Last week, trader attention was on Asia, where an arbitrage opportunity presented itself for the first time this year. Deals were heard done at 45.5
cents/lb and 46 cents/lb in response. On Monday, though, the Asian price was
at $1,075/mt for the second half of September, making Europe a more likely
destination for US styrene.


Producers also were raising their offers in response to climbing spot benzene prices. Offers for benzene jumped to 300 cents/gallon, with bids at 290 cents/gallon. The US benzene price on Friday was assessed at 284.75 cents/gallon FOB USG for August.


The jump in spot benzene pushed variable costs for US styrene production to near 45.5 cents/lb. Assuming 3 to 4 cents/lb for fixed costs and margin, producers offers were notionally approaching 50 cents/lb.


"The producers will always quote [a styrene price based on] the highest benzene price," a trading source said. The benzene spot price was about 15 cents above the August benzene contract price of 279 cents/lb.


If the spot benzene price climbed well above the contract price, styrene producers would be motivated to sell the benzene into the spot market instead
of converting it into styrene.
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