Asia’s SM prices up 15% on tight supply in east China

02 August 2012 07:43  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS)--Asia’s styrene monomer (SM) prices have risen by 15% from early June on the back of tight supply in east China and expectations of slight improvement in demand as the peak manufacturing period starts, traders and producers said on Thursday.

Spot prices reached $1,430/tonne (€1,173/tonne) CFR (cost & freight) China this week, up by around 15% from a low of $1,240/tonne CFR China in early June, according to ICIS data.

Inventories along the shore tanks in east China declined to below 80,000 tonnes this week, the lowest in this year, after rising to around 125,000 tonnes in June, according to the data.

Previously, inventories were at an all-time high of around 151,000 tonnes in early February, but drew down to below 100,000 tonnes in late April. The sell-off in global markets in May amid the intensifying eurozone debt crisis caused demand to weaken, the data showed.

“The decline in spot inventories along China in July has bolstered prices in Asia,” said a Taiwanese SM buyer.

The rebound of the market in the second half of June and July also prompted a number of short sellers to cover their positions.

“There are some short covering activities for August and September cargoes, contributing to the rising prices in these two weeks,” said a South Korean trader.

The lack of deep-sea parcels from the US arriving in Asia over the past several months caused regional availability to tighten further. The higher prices of SM in the US, as compared to prices in Asia, for most of the year so far have essentially kept the US-Asia arbitrage window closed.

“The volatility of the markets this year have also prompted traders to adopt a cautious stance, especially for deep-sea cargoes as shipping time is usually several weeks,” said a trader in Singapore.

Meanwhile, downstream styrenic resins demand showed little improvement in July, despite the start of the third-quarter manufacturing season in China, according to market players.

Nonetheless, SM sellers expect demand to pick up gradually in August and September as factories in China usually ramp up operating rates during that period.

SM is a liquid chemical used to make resins such as polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) as well as synthetic rubbers such as styrene butadiene rubber (SBR) and styrene butadiene (SB) latex.

($1 = €0.82)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Clive Ong
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