The Asian styrene monomer/benzene spread widened to $459.50/mt Monday, its widest in seven months on firmer SM prices driven by tighter supply.
The spread was last wider July 2 at $488.50/mt, and averaged $378.20/mt in 2015 — both well above producers’ expected breakeven level of $250/mt.
Asian SM prices rose $17.50/mt from Friday to $1,021.50/mt FOB Korea and $1,048.50/mt CFR China Monday, while Asian benzene rose $3/mt over the same period to be assessed at $562/mt FOB Korea and up $6/mt to $581/mt CFR China Monday.
CFR China SM prices were last higher August 17 at $1,076.50/mt, Platts data showed. The CFR China SM marker has rebounded 18.7% from its year-to-date low of $883.50/mt CFR China on January 21.
Market sources expect SM margins to remain healthy through the second quarter, if supply tightness in the Asian SM market continues.
Supply has tightened as a result of turnarounds, the scrapping of a SM plant in Japan, active short-covering by traders and limited arbitrage cargoes from the US and Europe to Asia.
“There is a major turnaround season in Japan this year, whereas new SM plant startups in Asia may be delayed,” a trader based in Seoul said.
The Asian SM market is set to lose around 223,000 mt of production in H1 2016, in line with a loss of 223,620 mt in H1 2015, according to Platts calculations.
Asahi Kasei’s 320,000 mt/year SM plant in Mizushima was scrapped in mid-February.
But these bullish factors for SM could be tempered by weaker crude oil futures and slower Chinese economic growth, leaving many market sources to predict the rally will not be sharp or sustained.
WEAK DEMAND CAPS BENZENE MARGINS
The Asian benzene market is expected to face weak demand in Q2 as the arbitrage window from South Korea to the US Gulf Coast likely remains closed due to scheduled maintenance of downstream plants.
US inventory levels are likely sufficient after South Korea exported more than 400,000 mt to the US Gulf Coast over November-January, up 34.7% year on year.
Any uptrend in Asian benzene prices would require demand from downstream Chinese plants, as Northeast Asian sellers look to new downstream SM plants to consume available regional supply.
The Asian benzene market could also be supported by tight supply amid turnaround season in South Korea and Taiwan, most of which is scheduled for March-June.
