Asia SM makers cut output to halt heavy inventory build-up

28 May 2009 05:44  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS news)--Asian styrene monomer (SM) makers have started scaling down production as inventories pile up in the face of shrinking demand from China - a key market for the chemical, traders and producers said on Thursday.

Taiwanese producer Formosa Chemical and Fibre Corp (FCFC) shut its 300,000 tonne/year No 2 line this week for a 40-day maintenance while Taiwan Styrene Monomer Corp (TSMC) has plans to idle its 180,000 tonne/year No 1 line by the end of the month or early June for a three-week shutdown.  

Producers in Japan were also keen on cutting operating rates at their SM plants as stocks had swelled while off-takes have been slowing down over the past weeks, industry sources said.

Inventories along the eastern Chinese shore tanks grew to around 60,000 tonnes this week from around 40,000 tonnes in early May, market players said. 

SM stocks could further increase in the weeks ahead as supply was also being augmented by deep-sea lots that were priced $10-20/tonne (€7.2-14.4/tonne) lower than Asian material.

“Deep-sea parcels have continued to arrive in China since May and some have been booked to reach [the country] in July, so inventories in eastern China are likely to increase even more,” said a Korean trader.

The 75-day maintenance shutdown at Shanghai Secco Petrochemical’s 500,000 tonne/year SM plant in eastern China in mid-May has failed to significantly dent supply as demand from downstream styrenic resins sector had weakened at the start of the month, market players said.

Buyers have turned cautious due to uncertainties on the manufacturing and exports outlook in the third quarter, they said.

“Output rates of polystyrene (PS) in China had dipped to around 50% while expandable (E) PS were only at around 60%,” said a producer in Taiwan.  

The lacklustre demand for SM due to the poor downstream styrenics output could last up to June, with a possible improvement in July when China's manufacturing season comes in full swing.

($1 = €0.72)

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By: Clive Ong
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< previous article(ICIS Chemical Business podcast November 2, 2009)

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