FocusEast China SM prices to rise on high demand, crude values

10 February 2011 08:24  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS)--East China styrene monomer (SM) prices are expected to continue on an uptrend in the weeks ahead on expectations of strong demand, high crude values and the appreciation of the Chinese yuan, traders said on Thursday.

SM prices were trending higher in the Chinese domestic market at yuan (CNY) 10,500/tonne ex-tank ($1,593/tonne) on Thursday, up from CNY9,900/tonne ex-tank from early November, ICIS data showed.

The strength in SM prices has continued despite shore tank inventories in east China having swelled to above 160,000 tonnes after the Lunar New Year holidays, traders said.

Market players were anticipating strong demand because of the 2m tonnes expansion in the downstream styrenic plastics sector, which would be five times larger than the expected 400,000 tonne/year increase in SM production capacities this year.

Supply would remain tight for the whole of 2011 in Asia and that has led to higher SM prices, traders said.

Meanwhile, the recent surge in crude oil prices has prompted petrochemical producers in Asia to follow suit, said traders.

“The strong performance in the crude oil sector would likely translate to higher petrochemical prices, including that of SM,” said a producer based in east China.

“The continued appreciation of the yuan would also likely push SM prices higher, so some buyers are actually buying in anticipation of the higher prices,” a Chinese trader added.

As a result, more imports were made over the past several months and SM shore tank inventories had begun to swell, said traders.

The inventories were up by around 10% from 145,000 tonnes in late January and more than double the low 70,000s tonnes seen in early November, according to ICIS data.

“The sharp build-up in inventories signifies players’ confidence in Chinese demand after the Lunar New Year holidays,” said a northeast Asia-based trader.

However, some dealers were worried about the current high inventory levels and cautioned that it could pull SM prices down in the near term.

They said the strength of Chinese domestic demand remained to be seen, as many players were only just returning to the market this week.

“Most small-to-mid-sized factories remained closed, hence we will have to wait until next week before gauging the strength of end-user demand,” said another trader in China.

($1 = CNY6.59)

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By: Clive Ong
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