FocusAsia SM stabilises at low-$1,500s/tonne; may fall in Oct-Nov

25 September 2012 06:48  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS)--Asian styrene monomer (SM) prices stabilised this week, and appeared to have found a temporary floor in the low-$1,500/tonne levels because of tight supply in the key China market, traders and brokers said on Tuesday.

Prices may ease into the second half of October and through to November as the Chinese manufacturing season for exports draws to a close, they said.

SM prices hit a high of $1,625/tonne CFR (cost & freight) China on 18 September before tumbling to $1,480-1,520/tonne CFR China on 21 September, according to ICIS data, as US crude futures retreated to the low-$90/bbl levels.

Several deals are concluded at the low-$1,500/tonne levels this week, market sources said.

SM inventories along the east China shore tanks dwindled to around 40,000 tonnes last week, compared with 103,000 tonnes in late June, industry sources said.

“SM stocks are at very low levels on a historical basis and the tight availability is propping up domestic prices,” said a broker in China.

Domestic SM spot prices in China surged to yuan (CNY) 12,700-13,100/tonne ($2,013-2,076) ex-tank for the week ended 21 September, up by CNY1,850-2,150/tonne a month ago, according to Chemease, an ICIS service in China.

A very tight availability of prompt cargoes has also caused a steep backwardation in the market that persists into this week, with the first-half October cargoes priced at around $70-90/tonne higher than November parcels.

“The severe backwardation signals the extremely tight conditions for [first-half] October cargoes,” said a Korean trader.

Early last week, SM prices spiked as several traders attempted to cover short positions amid scarce prompt cargoes after the US announced its bond-buying program that sent global markets rallying.

As the short positions began to close out, prices reversed their uptrend and sank to below $1,550/tonne CFR China late last week.   

Further declines in prices are possible as demand for styrenic resins will ease, along with SM consumption, with the winding down of manufacturing activities in China.

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

($1 = CNY6.31 / $1 = €0.77)

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

By: Clive Ong
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