FocusStyrene prices in China declining under high inventories

07 February 2012 07:00  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS)--Styrene monomer (SM) prices in China are likely to maintain a downtrend weighed under high inventories along the east Chinese shore tanks and lacklustre downstream demand, traders and buyers said on Tuesday.

Spot prices in China declined to the low of $1,400s/tonne (€1,064s/tonne) CFR (cost & freight) for the week ended 3 February from around $1,450/tonne CFR in late January, according to ICIS data.

On the other hand inventories in east China jumped above 150,000 tonnes last week from just above 100,000 tonnes before the Lunar New Year holidays during 22-28 January.

“The sharp increase in inventories has dampened sentiment of the market players,” a trader in China said.

Domestic prices in east China have also declined last week, to yuan (CNY) 10,100/tonne ($1,601/tonne) ex-tank from around CNY 10,250/tonne ex-tank before the holidays.

“While there is some recovery in demand in the styrenic resins sector, the pick up has been more modest than expected,” said a resins trader in Hong Kong.

Consequently, the slow improvement in the downstream sector is viewed by SM players to be insufficient to quickly digest the high monomer stocks in the short term.  

“The high SM inventories and slow improvement in the plastics demand is exerting downward pressure on SM prices,” said a plastics manufacturer in Taiwan.

This has led to some end-users staying away from the market in anticipation of weaker prices in the near term.

Domestic Chinese operating rates have remained mostly unchanged at an average of 70% for polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) plants after the Lunar New Year holidays.

While demand for resins is expected to pick up in February and March when end-users replenish stocks for the production season that usually starts in April, buying momentum has remained weak so far.

“Buying interest has not picked up strongly yet, although offers of plastic resins have increased,” said another trader in Hong Kong.

The ongoing debt crisis in the eurozone and weak economic conditions in the US are expected to continue dampening demand for Asian made products.

”Demand for finished goods from the eurozone and the US is likely to remain weak in the first half of the year so demand for resins and as a result SM will be capped,” said another resins producer in Taiwan.

The styrenics and SM markets are also unlikely to get another boost from the Chinese government which appears to have ceased loosening of monetary policy after reducing bank reserves once late last year.

“So far there is no further indications that credit in China would be loosened further, hence there is limited stimulus for demand in the domestic market,” said an SM producer in East China.

SM is a liquid chemical which is used to make plastics like polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) as well as synthetic rubbers like styrene butadiene rubber (SBR) and styrene butadiene latex (SBL).

($1 = €0.76 / $1 = CNY6.31)

By: Clive Ong
+65 6780 4359

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