Asian styrene monomer prices have entered the third quarter of this year with a rebound, helped by low China inventories and upcoming turnarounds in the region.
The CFR China SM marker rose 8.3% to $1,056/mt on July 12, from the lowest level in the second quarter, at $975/mt on May 27, according to S&P Global Platts data.
Market sources attributed the strength in early Q3 to low SM stocks in east China and massive turnarounds planned for August and September in Asia.
An estimated 71,100 mt of SM may be lost in August and 145,920 mt in September, accounting for 5% and 10% of normal production, respectively, according to Platts calculations.
In addition, regional SM supply is expected to tighten further in Q3 as plants in east China would have to be shut in August-September due to the G20 summit that will be held in Hangzhou over September 4-5.
Petrochemical plants in the surrounding cities have been asked to cut production to ensure good air quality during the summit.
“I think Q3 will be a stronger quarter for styrene, considering the market demand and turnaround outages in the region,” a market source said.
Meanwhile, SM inventory in east China averaged at around 99,225 mt in June, which was down 18% month on month, Platts data showed.
US IMPORTS MATTER AMID WEAKENING EUROPE
US arbitrage barrels to Asia could be a factor that offsets the tightness in Q3, amid recent weakening of the European SM market.
“Some people think Asia will be stronger than Europe [in H2 2016]. In that scenario, more US material will move to Asia, [which will] bring the [Asia] price down,” a US-based trader said.
In Europe, a trading source described the styrene market as “balanced to long.” Europe saw high volumes of US product arriving on its shores in June and July, but the flow of US product to that region was heard to be drying up as US interest shifts eastwards to Asia.
The US to Europe SM arbitrage was currently not workable on paper, with the FOB US Gulf Coast assessed at $980.78/mt and FOB ARA at $1,010/mt on July 8 and July 12, respectively.
The freight rate for that route is around $56/mt for a 5,000 mt aromatics cargo, according to Platts data.
The FOB Korea SM marker was assessed at $1,034/mt on July 12, the highest level among all three regions.
Demand from the downstream polystyrene markets in Europe is expected to ease in August, which will reduce styrene requirements there. This has led to European prices trending lower than Asian prices in the past few weeks.
Most SM plants in Europe were heard to be running smoothly, following major supply disruptions in late May. Europe is expected to be largely self-sufficient in the coming few weeks, according to market sources.
The volume of US-origin SM supply to Asia is a critical factor that significantly influences Asian SM prices.
Despite May’s SM production in Asia dropping to the lowest level in H1 2016, Asian SM prices fell by 7% in May from April and 26% year on year, mainly due to a heavier flow of US SM into Asia.
US SM exports to South Korea in March — which arrived in May — jumped more than six-fold year on year to 63,209 mt, and to China the exports were up more than four-fold to 42,852 mt, according to data from the US Department of Commerce’s International Trade Commission.
