Rising SM prices in China open west to east arbitrage

09 November 2009 04:31  [Source: ICIS news]

SINGAPORE (ICIS news)--The rebound in styrene monomer (SM) prices after the Chinese National Day holidays in early October has led to the opening of the west-to-east arbitrage window, traders and brokers said on Monday.

Spot SM prices into the key Chinese market rose from the mid-$900s/tonne (€603) CFR (cost and freight) China in early October to above $1,050/tonne CFR China in early November, according to data from global chemicals market intelligence service, ICIS pricing.

Around 50,000 tonnes of SM from the US were heard fixed for Asia in early November, as rising prices in Asia prompted traders to ship material here.

“Most of these cargoes would end up in China, the largest end-user market in Asia,” a Korean trader said.

Traders and brokers expected these cargoes to reach Asia in January, taking into account the typical 6-8 week shipping time frame from the US to Asia.

“Most of these cargoes were fixed at around 45 cents/lb FOB (free on board) US or around $990-995/tonne FOB US,” said a broker in Asia.

With the cost of shipping and related expenses from the US to Asia at around $70-80/tonne, these cargoes would reach China at around $1,065/tonne CFR.

Talk circulated in the market that another 10,000-20,000 tonnes of November SM from the US could be fixed for Asia at 44-45 cents/lb FOB US.

Given the increasing in-flow of cargoes into Asia, end-users anticipate downward pressure on prices for January cargoes.

Already, the eastern China shore tank inventories have been growing over the past several weeks. Estimates of volume last week were pegged in the high 50,000s tonnes compared to below 45,000 tonnes in first half October.

Inventories were expected to grow further in December as supply outpaces consumption during the year-end lull season. Some market participants believed that volume in the tanks could top 100,000 tonnes in January.

($1 = €0.67)

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By: Clive Ong
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