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Tuesday, August 16, 2022

Asian SM margins flip to positive for first time since May as ethylene slips

Margins for non-integrated styrene monomer producers Monday, October 20, moved back into positive terrain for the first time in five months as ethylene prices fell and SM prices found support in shrinking inventories in China, Platts data shows.

SM was assessed at $1,450/mt FOB Korea Wednesday, up $30/mt on the day and an estimated $9.10/mt above a breakeven level calculated at $1,440.90/mt, based on the most recent prices of feedstocks benzene and ethylene.

Upstream, ethylene Wednesday fell $40/mt day on day to $1,395/mt CFR Northeast Asia — the first time the price of ethylene has been lower than the FOB Korea SM price since mid-August — while benzene rose $14/mt over the same period to $1,122/mt FOB Korea.

SM is made of roughly 79% benzene and the rest ethylene. The breakeven is calculated using the feedstock prices and a production cost of $150/mt.

The last time SM prices were above breakeven was May 20, with FOB Korea at $1,567/mt, $8.20/mt above an estimated breakeven, Platts data shows.

Despite crude oil and naphtha prices coming off in recent weeks, SM prices found support in shrinking inventory levels in the key market of China.

Inventories held by traders in the east of China — the so-called spot inventory — have fallen 51.4% to around 90,000 mt last week from a year-to-date high of 185,000 mt on March 21.

Meanwhile, stubbornly high ethylene prices in Northeast Asia started to fall sharply two weeks ago as crude oil prices tumbled.

After being stuck at $1,530/mt CFR Northeast Asia for almost a week, the ethylene price fell $135/mt, or 8.8% from October 9 to $1,395/mt CFR Northeast Asia on Wednesday.

However, integrated producers of SM, who base their margin of naphtha and target an SM price about $550-600/mt above naphtha — depending on the age of the plant — have enjoyed better margins, and recently a widening spread.

The premium of SM over naphtha was last assessed at $730/mt on Wednesday, with naphtha up $10/mt on the day at $719.88/mt CFR Japan. The premium hit a nine-month high of $734.30/mt on October 10.

– Platts.com

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