Asian styrene monomer prices tumbled to more than four-year lows as the market struggled with tight credit policies in China, plunging crude, non-performance among traders, and weakening downstream demand, trade sources said Thursday, November 27.
The markers were assessed at $1,193.50/mt FOB Korea and $1,220.50/mt CFR China Wednesday, down $25/mt from Tuesday.
The last time prices were any lower was on September 29, 2010, with FOB Korea at $1,191/mt and CFR China at $1,216/mt CFR China, data showed.
“Weak crude, bad downstream, weak benzene, lack of cash — long players don’t have enough money to hold the cargoes in hand and SM is oversupplied,” a China-based trader said Thursday.
Since October 31, Asian SM prices have plummeted 14.4% from $1,398.50/mt FOB Korea and $1,425.50/mt CFR China, and one of the main factors was non-performance among traders who had taken a long position on SM, but ran into trouble following the recent plunge in crude, trade sources said.
Over the same period, main feedstock benzene has fallen 9% to be assessed at $981/mt FOB Korea on Wednesday.
Also, downstream demand for SM, especially for expandable polystyrene, typically slows down significantly during winter months — December-February — as construction activity wanes in China.
SM production margins have also been shrinking lately as SM falls faster than its feedstocks.
Integrated producers base their cost on the spread to naphtha, which has narrowed 22.4% from $680.5/mt on October 31 to $528/mt Wednesday, data showed. Integrated producers usually target at least $550/mt for healthy margins.
The SM spread against another of its feedstocks, benzene, has narrowed even further — 33.8% from the October 31 spread of $321/mt to $212.50/mt Wednesday, data showed.
Non-integrated SM producers typically need the spread to be about $250/mt to reach healthy margins.
– Platts.com
