Asia SM may rebound on firm benzene despite weak demand

By Clive Ong

SINGAPORE (ICIS)–Spot styrene monomer (SM) values in Asia may rebound after tumbling this week, with firm prices of feedstock benzene negating the downward pressure from weak demand, industry sources said on Tuesday.

At the start of the trading week, SM prices fell below $1,650/tonne CFR (cost and freight) China amid a strong build-up of inventory in the key China market over the Lunar New Year holidays from 31 January to 6 February.

On 7 February, SM prices were assessed at $1,655-1,670/tonne CFR China, according to ICIS.

Feedstock benzene prices, however, are holding steady and provide support to the SM market.

At midday, benzene was assessed at $1,342-1,347/tonne FOB (free on board) Korea, according to ICIS.

Meanwhile, the recent sharp fall in SM prices may also provide impetus for end-users to re-enter the spot market, given expectations that supply may tighten soon as some regional facilities are due for turnaround. Buying interest is strong at around $1,650/tonne CFR China, market sources said.

Expectations of limited availability of spot supply during the turnaround season – from February to April – should also buoy up SM prices, they said.

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-latex (SBL).

Asian prices of the material came off on Monday as traders attempted to liquidate long positions post-Lunar New Year, market sources said.

The key China market was on holiday on 31 January to 6 February for the Lunar New Year festivities.

Along eastern China, inventories of spot cargoes ballooned to 140,000-150,000 tonnes last week, more than double the pre-holiday levels of 67,400 tonnes, market sources said.

Domestic SM prices in China were assessed at yuan (CNY) 11,100-11,120/tonne ($1,832-1,835/tonne) ex-tank on Monday, down by around 4% from 7 February, thus, dragging down the import prices, according to Chemease, an ICIS service in China.

On the demand front, expectations remained bleak, as some downstream expandable polystyrene (EPS) plants in northern China that were shut during the holidays, may see some delays in resuming operations because of inclement weather, industry sources said.

“The northern region has recently experienced severe snow and that could disrupt plans to start up [the plants],” said an EPS producer in eastern China.

Other downstream styrenics sectors such as PS and ABS are also beset with weak demand.

“PS and ABS demand will likely improve only gradually as orders for finished goods remained limited,” said a Hong Kong-based trader.

Recent weak economic data out of China and the US continued to fuel talks that the Chinese exports sector will likely struggle in the first half of the year. Hence, resins producers expect demand to remain lacklustre in the near term.

“ABS seems to show a little improvement, while PS and EPS are generally quite soft,” said a resins producer in Taiwan.

($1 = CNY6.06)

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