Asia SM at seven-month high on better demand, tightening supply

05 March 2012 09:23  [Source: ICIS news]

SINGAPORE (ICIS)--Asia styrene monomer (SM) prices rose to a seven-month high above $1,500/tonne (€1,140) as market players anticipate a tightening of supply amid a number of turnarounds at regional facilities in the next two months, traders said on Monday.

Spot SM prices were assessed at average of $1,470-1,515/tonne CFR (cost and freight) China in the week ended 2 March, up $20-35/tonne from the previous week, according to ICIS.

Prices last breached the $1,500/tonne CFR China levels in late July 2011, ICIS data showed.

“Supply in the region is likely to remain tight in the near term,” said a Singapore-based trader.

Asahi Kasei Co and Idemistu Kosan in Japan and Samsung Total Petrochemicals in South Korea have scheduled turnaround at their SM plants in March and April.

“On top of the turnarounds, there are limited arbitrage cargoes coming to Asia recently,” said the trader in Singapore.

Buying interest from downstream styrenic resins sector is expected to strengthen further as Chinese factories usually ramp up production of finished goods from April,  market sources said.

SM demand started to improve in first half of February after the Lunar New Year holidays in Asia, with shore tank inventories of the monomer along east China falling to 135,000 tonnes last week from 151,000 tonnes a month ago, market sources said.

“Demand for SM have picked up in February although not as strongly as previously anticipated,” said a trader in China.

A number of traders remain cautious given the sharp run-up in prices in the past two weeks, with some talking of a potential correction in the near term.

SM prices on a CFR China basis increased $30-60/tonne over the past two weeks, according to ICIS.

“The improvement in the downstream sector has been modest, hence prices could recede,” said a trader in Korea.

Others, however, believe that prices have further upside potential as US crude futures remain high at around $107/bbl.

High energy prices and strong benzene prices at above $1,200/tonne FOB (free on board) Korea could provide some support to SM prices, they said.

”With costs at these levels, SM margins are still thin and sellers are still trying to reach higher prices," said another Singapore-based trader.

($1 = €0.76)

By: Clive Ong
+65 6780 4359

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