APIC ‘08: Asia SM to rise further on high crude

27 May 2008 09:52  [Source: ICIS news]

SINGAPORE (ICIS news)--Asia styrene monomer (SM) prices are expected to remain on the uptrend in the near term, given that crude prices show little signs of retracting, said traders on Tuesday.

High crude numbers had lifted benzene values above $1,300/tonne FOB (free on board) Korea, providing ballast to Asia SM numbers, a South Korean trader said on the sidelines of the Asia Petrochemical Industry Conference (APIC) in Singapore.

"As inventories in the key Chinese market continue to dwindle, and the US-Asian arbitrage window remained closed, SM prices would have further upside potential," he added.

"However, the sustainability of SM at the currently lofty level above $1,650/tonne CFR (cost and freight) China would largely depend on the expected pick-up in demand in the third quarter, the seasonal high production season," he said.

Demand for styrenic resins like polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) typically peaks during this time and would spur demand for the SM monomer.   

However, recession fears in the US had limited the orders for end products from China, while the Chinese government’s credit control policy to tame inflation had also dampened the manufacturing sector.

At the same time, the Chinese government’s policies to curb production and control distribution of chemicals during the Olympics had also cast a pall over production activities in recent months.

"As such, expected pick up in end-user demand for styrenic resins in the third quarter this year is far from certain," said a PS producer in China.

A number of traders also anticipated that the US-Asia arbitrage window could open if SM prices reached $1,700/tonne CFR China.

Traders expected a downward pressure on SM values if Chevron Phillips' 777,000 tonne/year unit at Al-Jubail came onstream in the third quarter.

Asia SM prices had increased sharply over the past weeks, and at a certain higher level US material would start to flow to China again, said a trader based on south China.

The additional material coming from the Middle East to China would also put a cap on prices here, he added.

ICIS custom publishing and The Chemical Daily have produced an official 84-page special publication on Asian petrochemicals for the APIC event
For more on SM visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Clive Ong
+65 6780 4359

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