FocusAsian styrene makers mull deeper ops cuts

24 November 2008 03:42  [Source: ICIS news]

SINGAPORE (ICIS news) – Asian styrene monomer producers are being forced to consider further production cuts from the current low levels due to the continued slump in spot prices and weak demand, producers and market players said on Monday.

 

Spot prices started to plunge in the second half of September, losing more than $800/tonne to reach the low $500s/tonne CFR (cost and freight) in the key Chinese market by end October.

 

A price rebound in early November to around $600/tonne CFR China proved to be short-lived, with prices falling again to the low $500s/tonne CFR level as crude dipped below $50/bbl, weighing down sentiment and fuelling talks of a severe global economic contraction in 2009.

  

Adding to thin margins, demand for SM is also dwindling, with all producers in Asia juggling high stocks which are fast losing their value.

 

Although operating rates in Japan and Korea were cut to around 70% by November, a number of makers are mulling further reductions in December.

 

"Demand from the key Chinese market remains weak and with the manufacturing sector entering a lull in December, makers will probably need to trim output further," said a producer in Japan.

 

Some Chinese facilities had shut while several were running at reduced rates below 50% as producers combat rising inventories and slowing demand. Eastern Chinese makers like Dong Hao Chemical’s 200,000 tonne/year unit in Changzhou and Shuang Liang Lishide’s 400,000 tonne/year facility in Jiangsu were shut down in October amid falling prices.

 

"Producers would have to reduce rates further to keep inventories at a manageable level, given that SM has a certain shelf life," said a eastern Chinese trader.

 

Taiwanese producers were also not spared when demand and prices collapsed in October. The island’s largest producer, Formosa Chemical and Fibre’s Corp (FCFC), had idled its 250,000 tonne/year No1 and 350,000 tonne/year No2 plants in Mailiao. Taiwanese buyers said FCFC would reduce operating rates at its 600,000 tonne/year No3 unit at the same location by some 40% in December.   

 

Other makers like Grand Pacific Petrochemical Corp (GPPC) was said planning to shut both its lines (330,000 tonne/year in Ta She) in December while Taiwan Styrene Monomer Corp (TSMC) maintained a low operating level of around 40% at its Lin Yuan units which have a combined output of around 340,000 tonne/year.

 

In Southeast Asia, Indonesia's sole SM maker Styrindo Mono Indonesia (SMI) planned to turn around its No 2 250,000 tonne/year unit in Merak in H1 December, the producer said. Its 100,000 tonne/year No 1 unit had been shut down since October due to muted buying interest.

 

Separately, Ellba Eastern has announced plans to cut operating rates at its 550,000 tonne/year unit in Singapore by an unspecified amount in the near term.  

 

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By: Clive Ong
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