FocusDeep-sea inflows to boost Asia SM supply; prices may fall

01 May 2013 05:04  [Source: ICIS news]

By Clive Ong

SM is a liquid chemical used in manufacturing plastic resins and synthetic rubbers. SINGAPORE (ICIS)--Asia will receive huge volumes of deep-sea styrene monomer (SM) cargoes by mid-year, easing tight supply in the region that has been supporting prices since the start of the year, traders said on Wednesday.

Arbitrage volumes estimated at around 50,000 tonnes from the US are expected to reach Asia in June and July, when regional demand typically weakens, they said.

“While availability in Asia has been rather tight over the past several months, deep-sea arrivals could start to have a downward impact on prices in the near term,” said an SM user in Taiwan.

SM prices have been trading at a range of $1,635-1,790 (€1,243-1,360/tonne) CFR China/tonne CFR (cost and freight) China levels since the start of the year, according to ICIS data.

Asian prices are currently higher than the US market’s  71-72 cents/lb, which is around $1,565-1,587/tonne.

Shore tank inventories of spot SM in Asia have mostly fluctuated between 50,000-90,000 tonnes this year, lower than the stocks in the same period last year at more than 100,000 tonnes, they said.

Availability of spot cargoes has been scarce, particularly in the last three months because of scheduled turnarounds at regional facilities, traders said.

Those SM plants in operation, on the other hand, have been running at reduced rates in view of weak demand for downstream styrenic resins since the fourth quarter of 2012, industry sources said.

Some producers in Asia are keeping output at around 85-90% this year compared to 90-100% in previous years.

“Demand for resins are still relatively weak and producers are generally keeping lower output,” said a Japanese SM maker.

The tight supply in the region has been preventing prices from falling significantly, notwithstanding weak demand, industry sources said.

In April, SM prices have been relatively stable at above $1,650/tonne, ICIS data showed.

An outage at SABIC’s 500,000 tonne/year SM unit in Saudi Arabia since the second half of March aggravated the scarcity of spot cargoes flowing into Asia. The facility is expected to resume operations in the first half of May, industry sources said.

“If SABIC restarts as planned, then [its] supply to Asia will likely resume by the second half of May,” said an SM buyer in northeast Asia.

By midyear, SM facilities in Asia will have also completed their scheduled turnarounds.

“Prices could fall sharply if demand continues to taper off,” said an SM user in southeast Asia, citing that demand from downstream styrenics sector is unlikely to improve in June.

Continued economic weakness in the US and the eurozone has dampened demand for resins, consequently curbing SM consumption.

“By May, almost all [SM] facilities in Asia will have completed their maintenance, hence additional availability will hit the market from local plants as well,” said a Korean trader.

SM is a liquid chemical used in manufacturing plastic resins and synthetic rubbers.

($1 = €0.76)

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

By: Clive Ong
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