Asia SM extends price gains on crude recovery

Focus article by Clive Ong

SINGAPORE (ICIS)–Asia styrene monomer (SM) prices extended gains this week amid a recovery in crude futures but is not expected to breach the $1,200/tonne mark in the near future because of  weak downstream demand, market players said on Thursday.

West Texas Intermediates Crude futures rallied to above $50/bbl on 26 March after slumping below $43/bbl last week.

Consequently, SM prices which followed energy values lower last week quickly rebounded as well.

After trading at around $1,090/tonne CFR (cost & freight) China on 20 March, spot prices surged to the mid $1,100s/tonne CFR China by the middle of this week, according to ICIS data

“Crude has impacted sentiment overall and hence SM is moving up,” said a broker in Singapore.

A number of market participants also attributed the rapid upswing in SM prices to tight availability in Asia.

“Deep-sea cargoes coming from the US to Asia in April has been delayed,” said a broker in Korea.

Vessel delays over in the US has resulted in delays for March and April arrival cargoes.

At the same time, a number of SM facilities are undergoing maintenance shutdowns from March to May.

Hence, spot availability is expected to remain constrained in the near term.

Shore tank inventories along eastern China were estimated at 166,300 tonnes with spot volumes at 110,800 tonnes, down from 175,700 tonnes and 117,400 tonnes respectively last week. This further supports the perception that supply is snug. 

Buying indications for April and May parcels rose further to $1,160-1,170/tonne CFR China on 26 March, according to several brokers.

Some players, however, expect prices at $1,200/tonne CFR China to be difficult to achieve, given the weak performance in the downstream styrenic resins sector.

“Resin prices are not moving up in line with SM as demand has remained weak,” said a resin trader in Hong Kong.

Prices of polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) could not move up in tandem with SM this week, with buyers mostly unhurried as they have some inventories on hand.

“We have some stocks on hand and also the number of orders for finished goods received so far was below expectations,” said a resin user in southern China.

Resin traders expect limited improvement in demand from China in April.

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

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