European styrene prices are expected to be most affected of the region’s Aromatic markets by U.S. and Israeli military strikes on Iran as the region faces limited supply and is importing product, with around 80% of shipments arriving from China that may now be delayed, according to sources.

The most immediate impact on the European aromatics market has been the surge in energy prices on Monday. At market close Monday, the front-month Brent crude futures contract was up $5.72/barrel to $78.12/bbl, according to data from the Intercontinental Exchange.

A lack of supply is much more critical for styrene than it is for benzene, because around 38% of European styrene capacity is going offline for planned maintenance in the second quarter of this year. A lack of available product has prevented companies from building inventories to cover lost output. Subsequently, sources inform OPIS that they expect styrene prices to jump in
the second quarter as any delay or even cancellation of imports from the East will only amplify the degree to which styrene ranges rise.

Still, one aromatics market participant cautioned it was too early to comment. “There is a lot going on since the weekend and it takes time to get a clearer picture,” the source told OPIS on Monday. However, Europe is not a major importer of aromatics from the Middle East or Asia. Chemical Market Analytics (CMA) by OPIS, a Dow Jones company, said the main impact of the attacks will be on the Asian aromatics market.

European aromatics prices climb on day

March and April spot styrene offers in Europe on Monday have pulled back by $125/metric ton from Friday, but no bids were reported. The mid-point of benzene spot prices for March delivery has increased by $70/mt to $965/mt, while spot prices for April delivery climbed by $65/mt to $950/mt, sources said.

Crude prices have already surged, but of far greater concern for European aromatics producers will be the steep rise in naphtha and liquified petroleum gas (LPG) prices caused by a loss of supply from the Middle East.

The Middle East is a major supplier of both naphtha and LPG to the Far East petrochemical sector and so any disruption to its supply of these feeds will have an impact, both in terms of securing feedstock as well as on production costs.

Most analyst reports seen by OPIS point to Asia switching to Europe to replace its lost Middle Eastern naphtha cargoes, but Europe is also showing robust buying interest for naphtha, according to sources. The subsequent pull from Asian buyers and tug from Europe to keep cargoes in the region will drive European naphtha prices higher.

A disruption to shipping caused by the reluctance of owners to enter the Middle East Gulf or sail via the Red Sea will drive up freight rates for tankers and container vessels, according to shipowners. It could also see fewer vessels available as they are tied up on longer voyages, which will also drive up freight rates and make it harder to find vessels to move cargoes from the East to Europe.

Over the longer term the market will see higher feed and freight costs and possibly lower imports arriving from the East. This will maintain the current short supply of both benzene and styrene into the second quarter.

Reporting by Yazdi Merchant, ymerchant@opisnet.com; Editing by Rob Sheridan, rsheridan@opisnet.com