28 March 2005 00:01 [Source: ACN]
THE Asian demand and supply balance for styrene looks set to remain tight for H1 2005 owing to a decline in the volume of deep-sea material arriving into Asia. Styrene end-users and traders were last week preparing for a sharp drop in deep-sea material arriving from the US in the coming two months.
According to industry players, high prices in the US had made arbitrage not feasible in the past three months and this trend was likely to continue through into H1 2005. Prices of styrene in the US last week were at US$1300/tonne fob USGC, unchanged from prices in the previous week. A Japanese trader said that, with styrene prices at US$1300/tonne fob USGC and freight rates between the US and Northeast Asia at US$70-80/tonne, it was impossible for arbitrage to take place.
Exports from Japan and South Korea are expected to compensate for the shortfall in US exports this year. The total contribution of deep-sea exports into Asia from the US was 31% in 2002, 42% in 2003 and 48% in 2004. Exports to China, South Korea and Taiwan accounted for 90% of total US exports in 2002 and 94.7% in 2004. Exports from the US into China totalled approximately 296 550 tonne in 2004, 17 160 tonne more than in 2003.
However, industry players were unsure whether exports from Japan and South Korea could entirely replace the US in meeting Chinese demand. A Chinese trader said that deep-sea material arriving from the US in the last two months comprised mainly contract material. ‘If styrene prices in the US continue surging in Q2 2005, the balance in Northeast Asia will tighten considerably,’ said the Chinese trader.
The peak demand season in China starts in late Q2 2005, when demand from the household appliances and construction sectors begins to climb. Styrene demand from the polystyrene (PS), acrylonitrile butadiene styrene (ABS) and expandable polystyrene (EPS) makers was expected to surge during late Q2 2005 to early Q3 2005.
According to CMAI’s Vince Sinclair, China’s PS demand for 2005 was projected to rise by 150 000 tonne to 2.8m tonne from the previous year, while China’s ABS demand was expected to increase by 287 000 tonne to 3.19m tonne.
In February, when buyers realised there was barely any deep-sea material entering Asia in March and April, traders and end-users rushed to the market to secure spot material, causing prices to soar to US$1290-1300/tonne cfr China. The Chinese trader said prices were likely to surge beyond the US$1300/tonne cfr China level during the Q2 2005 peak season if the absence of deep-sea material persists.
Industry players also cited other reasons for anticipating a tight styrene balance in Asia for H1 2005. ‘The peak demand season for PS, ABS and EPS in China coincides with the turnaround schedules of the major Northeast Asia styrene producers, and spot material from Japan and South Korea may not be adequate to meet the increased styrene requirements during that period,’ said a South Korean trader.
A spate of turnarounds in April, May and June is expected to tighten supply considerably in Q2 2005. Asahi Kasei had shut down its 150 000 tonne/year and 300 000 tonne/year styrene units at Mizushima, Japan in mid-March for 30 days. A company source estimated the company would suffer a supply shortfall of 57 000 tonne as a result of the turnaround.
Mitsubishi Chemical also intends to shut down its 400 000 tonne/year plant in Kashima, Japan, for a 30-day turnaround on 29 April. A company source said that during the shutdown period, export volume to China would be decreased.
Meanwhile, SKC Chemical plans to shut down its 400 000 tonne/year styrene plant in Ulsan, South Korea at the end of May for 30 days, while Nippon Styrene Monomer’s 275 000 tonne/year plant in Oita, Japan, will be shut down for a 17-day turnaround on 2 April.
In Southeast Asia, Ellba Eastern will shut its 550 000 tonne/year styrene plant in Pulau Seraya, Singapore, for a 40-day turnaround in May.
A second Japanese trader said it expected styrene prices to surge beyond the US$1330/tonne cfr China in Q2 2005.
The decrease in exports from the US had led to a sizeable increase in demand for imports from Japan and South Korea. ‘In January this year, China had imported 201 171 tonne of SM from Japan and South Korea. This is an increase of 41 250 tonne compared with the same period last year,’ said the Japanese trader. ‘With Southeast Asia also reducing exports during Q2 2005, styrene end-users should start increasing inventory levels now.’ – Quintella Koh
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