The spread between styrene monomer and one of its feedstocks, ethylene, in Asia narrowed to its lowest level in almost three years Thursday, at $59/mt, amid increasing inventories of SM in China.
SM was assessed $7.50/mt lower day on day at $1,559/mt FOB Korea at the Asian close Thursday, while ethylene was stable at $1,500/mt CFR Northeast Asia.
The last time the spread between the two products was smaller was on April 12, 2011, when it stood at $53/mt. The spread has narrowed by $122/mt or 67.4% since January 2 this year.
Asian SM prices have fallen in 2014 with downstream end-users in China — the biggest consumer in the region — lowering operating rates ahead of and during the Lunar New Year holidays, which were celebrated over January 31-February 6. SM started the year at $1,691/mt FOB Korea on January 2, but has tumbled $132/mt or 7.8% since then.
China demand has remained weak after the holidays as downstream operating rates have been slow to pick up, market sources have said.
Sources this week estimated the inventory of SM held by traders in East China at around 170,000-180,000 mt, up from about 160,000 mt last week. This week’s inventory level is the highest since Platts began publishing the data in December 2006. Meanwhile, the total inventory held by both traders and end users in East China was estimated at close to 320,000 mt this week.
In comparison, ethylene has not fallen by as much as SM this year; it is down only $10/mt, or 0.7%, since starting the year at $1,510/mt CFR Northeast Asia on January 2. The main reason for the stability in the ethylene market is the upcoming steam cracker turnaround season in Asia over March-May.
SM consists of roughly 29% ethylene and 79% benzene. The SM-benzene spread stood at $291/mt on Thursday — above the $250/mt threshold that producers target — but down $59/mt, or 16.9%, from $350/mt on January 2.
Based on the latest feedstock prices and a conversion cost of about $150/mt, the breakeven price of SM was estimated at $1,587/mt on Thursday, $28/mt higher than the assessed price of $1,559/mt FOB Korea. On January 2, the FOB Korea SM price stood at $1,691/mt, $44/mt above the estimated breakeven price of $1,647/mt, Platts data shows.
Source: Platts.com
