Asia SM uptrend cut short by strong build-up in China inventory

Focus story by Clive Ong

SINGAPORE (ICIS)–Spot styrene monomer (SM) prices in Asia have halted their uptrend mid-week after a substantial inventory build-up of the material in the key China market, industry sources said on Thursday.

SM is trading in the low-$1,600/tonne CFR (cost and freight) China levels this week, with market players expecting prices to come under pressure from growing supply in the region.

Inventories in eastern China shore tanks this week stood at 303,500 tonnes, about 60% or 181,300 tonnes of which are spot cargoes, according to ICIS estimates.

The stockpiles have grown by about 12% from the previous week, with the spot cargoes up around 8%, which took the wind out of the regional market.

Spot SM prices into the key Chinese market had steadily increased from below $1,570/tonne CFR China on 4 June, buoyed by the possibility that Asia may ship out parcels to the west following an outage at a major European SM facility, industry sources said.

But the gains were cut short following the data on China’s SM inventory build-up.

“The build in SM inventory continues to suggest that downstream demand remains lacklustre,” said a Taiwanese resins producer.

Sellers emerged to offload cargoes, raising expectations among some end-users that SM prices will once again dip below $1,600/tonne CFR China, market sources said.

“The inventories will likely continue to rise as there is no pick-up in downstream demand, while supply in Asia is ample,” said a Korean broker.

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

A number of SM suppliers are also cautious about rising prices, noting that demand from the downstream styrenic resins sector remained weak.

“With high inventories in the key China market, it is worrying for producers since we have cargoes coming out each month,” said a regional producer.

Some parcels from the Middle East and the US continued to be offered to Asia, fuelling talk that supply in the region would continue to grow.

“Cargoes from the Middle East and the US will add to the supply here. And in Asia most plants have already completed their maintenance and are up and running,” said an SM buyer.

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