Price and market trends: Asia polystyrene price uptrend capped by receding SM values

01 March 2013 09:10  [Source: ICB]

Spot SM prices rise to $1,775/tonne CFR (cost & freight) China but then decline after the Lunar New Year holidays

An Asia polystyrene (PS) price uptrend will likely be capped as a result of retreating feedstock styrene monomer (SM) values despite an expected seasonal pickup in demand in the second quarter, producers and traders said on 20 February.

"The pull back in SM prices has prompted some PS sellers to avoid aggressive price hikes," a trader in Hong Kong said. Spot SM prices rose to around $1,775/tonne (€1,331/tonne) CFR (cost & freight) China during the week ended 15 February but then declined to $1,750/tonne CFR China when the Chinese market reopened after the Lunar New Year holidays.

Recent weak performance in the Asian benzene sector has dampened SM values. Benzene prices mostly hovered around $1,400/tonne FOB (free on board) Korea while SM numbers rose to $1,775/tonne CFR China in the first half of February.

The spread between the two products of more than $350/tonne was deemed too rich for some SM participants, prompting a sell-off in monomers.

Consequently, some PS producers quote offers at $1880-1,900/tonne CFR China and Hong Kong, rather than above $1,900/tonne CFR China and Hong Kong as previously thought.

While demand is expected to improve in March as end-users usually replenish stocks ahead of the higher production season in the second quarter, some traders expect that the less than convincing recovery in the US and eurozone economies will continue to weigh on Asian finished goods exports.

"Demand for PS should increase gradually into March as users' inventories have whittled down during the holidays," said a PS producer in China.

Offers of high impact PS (HIPS) hovered around $2,000/tonne CFR China and Hong Kong while some traders previously anticipated a push above $2,050/tonne CFR China and Hong Kong was in the offing after the Lunar New Year holidays.

"Suppliers have increased quotations modestly by some $10-20/tonne instead of pushing for a hefty increase in view of still slow demand," said another dealer in Hong Kong. While most sellers do expect demand to pick up in the coming weeks, they are trying not to dampen buyers' enthusiasm as resin prices are already in record high territory.

"Already there is some substitution going on for PS with polypropylene, so PS sellers are trying not to hike offers sharply. Yet at the same time, rising PS prices are needed to maintain workable margins," said a PS maker in southeast Asia.

The current spread between general purpose PS (GPPS) and SM is above $100/tonne, which is deemed adequate by most resin manufacturers.

"While some makers are thinking of PS prices at $1,920-1,940/tonne CFR China, it is not easy to conclude deals at this level this week," said a Taiwan-based resin manufacturer on 20 February.

By: Clive Ong
+65 6780 4359

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