NWE styrene-benzene spread in H1-2015 doubles on year amid unprecedented tightness

03-Jul-15

The average spread between Northwest European styrene monomer and feedstock benzene prices for the first six months of 2015 surged by US$246/mt (107%) year on year, Platts data shows. Over H1-2015, the spread averaged US$475/mt, increasing from US$229/mt during the same period last year. The surge was attributed to unprecedented supply tightness in the styrene market as scheduled turnarounds at styrene production plants in Europe limited availability, causing prices to become detached from feedstock costs. At least 20% of Europe's 6.665 million mt/year capacity was affected by turnarounds over March-June. The story was similar in Asia, where major styrene exporter South Korea saw as many as seven out of eight SM plants, or 76% of the country's 4.275 mln m tpa production capacity, shut for maintenance over March-May. However, market participants highlighted that styrene prices have been losing steam as the majority of turnarounds at European styrene units were concluded at the end of June, easing the supply tightness in the market going into the second half of the year. Consequently styrene prices have fallen back closer to feedstock benzene costs prices. Looking ahead, some industry sources expect the spread to continue to narrow in the coming weeks due to the bearish styrene market and the upward trend in the benzene market. "With everything normalizing, margins are decreasing this month but remain high. This is going to be the case with them for a while and at least through to mid-July," a consumer source said. However, due to the record-high spreads globally this year, the spread has a long way to before reaching levels seen in previous years. The NWE spread reached US$791/mt in late-March, the widest since Platts began assessing for two months forward in July 2004. Likewise in Asia, the spread hit a record high of US$704/mt in mid-May, the highest since Platts started assessing the FOB Korea styrene price in January 2004.