Asia’s styrene monomer (SM) prices declined to below $1,600/tonne on 12 February – a level held since November 2012. The prices are on a CFR (cost & freight) basis.
Sellers appeared to still have the upper hand with the downtrend starting early week. Some traders continued to trade on the short side with these positions set up prior to the Lunar New Year holidays in early February.
“They could be forcing the market lower a bit more before we see some short covering,” said a trader in Singapore.
Besides the short interests weighing on prices, some long positions players were said to be keeping to the sidelines as their ability to add was hampered by financing. “Long players could have reached the [limit] of their L/C (letter of credit) financing and could not significantly add to their positions currently. Hence prices could not be defended,” said a South Korean broker.
The long players continued to hold on to their cargoes with a sharp build in inventories along the eastern Chinese shore tanks over the Lunar New Year holidays. Estimates put early February total inventories at around 250,000 tonnes, with 140,000-150,000 tonnes available for spot.
The disparity between import prices denominated in dollars and domestic Chinese parcels in yuan (CNY) has disincentivised long players from selling their cargoes in the domestic market.
With local Chinese prices in eastern China hovering at around CNY11,100/tonne ex-tank, a broker remarked that it was approximately equivalent to $1,550/tonne CFR China. With deals for March heard at $1,582-1,595/tonne CFR China on 12 February, there remained a price gap between import and domestic cargoes.
Besides bulging inventories, a slow pick-up in performance in the downstream styrenic resins sector added to the bearish sentiment. Recent weak data out of China and the US spurred talk that the nascent global economic recovery could be in jeopardy.
FALL TO ATTRACT BUYERS?
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.
Expectations of limited availability of spot supply during the turnaround season – from February to April – should also buoy up SM prices, they said.
Asian prices of the material came off on 10 February 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 the week ended 7 February, more than double the pre-holiday levels of 67,400 tonnes, market sources said.