European styrene monomer production plants are running at lower rates as the warmer weather has put additional strain on the cooling systems in the production units, causing producers to reduce run rates, industry sources said.
This was limiting the amount of prompt material in the NWE styrene market.
“When temperatures hit 30 degrees [Celsius] or near there, you have to reduce the output rate, so the cooling systems can cope,” a producer source said.
The producer source said this was common in Europe during the summer months, but was typically compensated for by a decrease in demand during the holiday season.
However, styrene consumers have been active in the market over the past week due to restocking and short-covering, as supply tightness and high prices throughout the second quarter caused market participants to hold low inventory levels.
The combination of reduced run rates and bullish demand caused styrene prices to surge over the past week, as NWE styrene monomer barges loading 5-30 days forward were assessed at $1,347.50/mt FOB ARA Monday, rising $13/mt day on day and $82.50/mt on the week.
Looking ahead, market participants were divided on whether the recent surge in prices would continue going further into the third quarter, as some sources expected the seasonal demand lull to kick in during August after buyers amounted sufficient inventory levels to last the summer.
“It’s the excitement of having a [contract price] decrease after five months which is causing all the buying,” a consumer source said. “It will die down next month.”
The NWE styrene July CP settled at Eur1,325/mt (roughly $1,466/mt) FOB ARA last week, falling Eur85/mt from June and represents the first decrease in the MCP since February.
Other sources said bullish demand from the downstream derivative expandable polystyrene market, which is primarily used in the construction industry, would buoy prices and outweigh any demand slump from other styrene derivatives going into the summer.
– Platts.com
