Though May is typically a peak demand month for styrene monomer, and despite May’s production dropping to the lowest in first-half 2016, Asian SM prices fell by 7% from April and 26% on the year last month, S&P Global Platts analysis showed.
The Platts CFR China SM marker averaged at $1,025.10/mt for May.
In comparison, last year the marker had averaged at $1,386.38/mt — the highest monthly average for the year, data showed.
SM production in May this year was also lowest in first-half, with 72,790 mt estimated to be lost due to turnarounds in Asia, accounting for about 5% of Asia’s monthly production according to Platts analysis.
INCREASE IN US-ORIGIN SM
One of the main reasons for the unseasonally low prices in Asia was higher supply coming from the US, where the shale gas revolution has lowered production costs significantly.
The trend started from March this year, with US SM exports to South Korea in that month jumping more than six-fold year on year to 63,209 mt, and to China up by more than four-fold to 42,852 mt, according to data from the US Department of Commerce’s International Trade Commission.
The rise in US supply has depressed SM prices in Asia with the Platts CFR China SM marker on a downtrend since March 7, when it had peaked to an all-year high of $1,153/mt, data showed.
The rise in US SM supply also boosted inventory in East China with stocks averaging at 121,000 mt in May, up 179% on the year.
Lackluster downstream demand for SM have also kept prices under pressure with main market China recording low Purchasing Managers’ index, or PMI, over the past three months — it was at 49.2 in May, down from April’s 49.4.
The PMI is an indicator of the economic health of the manufacturing sector.
HAS SM BOTTOMED OUT?
But with prices rising this week — CFR China SM marker was assessed up 2% from last Friday at $994/mt Tuesday — on the back of improving buying sentiment and surging European SM prices, there has been talk that the Asian market has likely bottomed out.
French Total’s force majeure on its styrene unit two weeks ago due to a technical issues as well as industrial action in France tightened supply at the end of May in Europe, and boosted prices.
Platts FOB ARA SM marker reached all-year high of $1,202/mt on Tuesday.
The firm European prices could attract US cargoes away from Asia, leaving Asia short of supply, a trader said.
Last year, Asian SM prices rallied when the US to Europe arbitrage window on paper opened in March, May and September.
Narrowing SM production margins for non-integrated producers could also aid price recovery, said sources. The margins have been narrowing since peaking at $156.45/mt on March 3, due to firmer feedstock ethylene prices.
Upcoming heavy turnarounds in August-September in Asia and peak demand in the third quarter was supporting the positive outlook as well.
The production loss due to turnarounds in August and September was estimated at around 65,100 mt and 151,920 mt, respectively.
On the other hand, however, regional SM supply is expected to increase from June due to new SM plant startups in China, another market source said.
China’s Changzhou New Solar Chemical was heard to have started its new 300,000 mt/year SM plant in Jiangsu province recently, and CNOOC’s 300,000 mt/year SM plant in Ningbo plans to start commercial operations in July-August.
Looking forward, more US-origin SM could head to Asia once the turnaround season in Europe and US ends in end-May and June.
“It is premature to say Asian SM is bottoming out, as summer is a typical offpeak season. Asian SM may bottom out when September-October cargoes are discussed,” a third market source said.
