OUTLOOK ’11: Asia SM in for a good run as demand outstrips supply

24 December 2010 02:21  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS)--Demand for styrene monomer in Asia is expected to outstrip supply next year, with about 2m tonnes of additional styrenic resins capacity requiring feedstock coming on stream in China, boding well for prices, industry sources said.

In contrast, domestic SM capacity in the country would increase by less than a quarter of the incremental styrenic resin production next year at 400,000 tonnes/year, they said.

In Japan, however, SM production would be shaved as Mitsubishi Chemical was due to permanently shut production at its 371,000 tonne/year plant in Kashima in April.

“SM supply would likely be tight next year as downstream capacity has a large increase,” said an eastern Chinese producer.

On 23 December, the average SM prices stood at $1,367.50/tonne (1,039.30/tonne) CFR (cost and freight) China, up 3.6% from start of the year, recouping strongly from losses towards the middle of 2010, according to ICIS data.

The price correction in SM spot prices in late October, and again in late November, appeared to be a consolidation in the bull-run which began late July, market sources said.

The key Chinese market continued to support SM prices this month, despite the weakening of demand for downstream products such as polystyrene and acrylonitrile-butadiene-styrene (ABS) from late October, when the peak manufacturing season in China ended.

“Buying interest from China remained ample even during the current lull season,” said a trader in Japan.

From a broader global economic point of view, some market players were anticipating the policies adopted by major economies like the US and the eurozone would have an inflationary effect on commodities like oil and petrochemicals.

If the US continued to stagnate despite the heavy cash infusion into its economy under its quantitative easing policy, the funds would flow to the commodities market, artificially inflating values.

However, if these western countries succeeded in pulling their economies out of doldrums, demand for oil and petrochemicals would increase and naturally push commodity prices higher.

($1 = €0.76)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
To discuss issues facing the chemical industry go to ICIS connect

By: Clive Ong
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