Asia styrene prices at four-month high amid US plant woes

SINGAPORE (ICIS)–Plant troubles in the US Gulf region pushed Asian styrene monomer (SM) prices to a four-month high this week as market participants eyed possible arbitrage trades.

Discussions remained firm Friday morning, with a bid for a March cargo with origin restrictions at $1,450/tonne CFR (cost & freight) China.

On 25 January, prices rose $17.50/tonne from the previous day to $1,417.50/tonne CFR China, the highest level since September 2017, according to ICIS data.

SM prices have largely been on an uptrend since end December, in anticipation of tight supply in China due to the government’s antidumping probe on imports from South Korea, Taiwan and the US.

Earlier this week, SABIC declared a force majeure on styrene production at its 1.18m tonne/year Cosmar styrene plant in Carville, Louisiana, after unusually cold weather caused equipment failure. The producer expects full production to resume in early March.

Saudi Arabia’s SABIC and France’s Total jointly own the Cosmar complex in the US Gulf.

On 23 January, Total declared a force majeure on polystyrene (PS) products made at the Cosmar facility.

Exacerbating the supply issues were a slew of turnarounds scheduled over the first quarter of the year, particularly in the US, Europe and Middle East. Market participants in Asia were expecting fewer deep-sea arrivals in the first quarter on expectations of limited spot supply availability over the period.

Expectations of a surge in prices in the US and Europe led some market players to explore the possibility of Asian SM cargoes being exported to meet supply outside of the region.

“I think a reverse arbitrage may be possible soon, like last year,” said a northeast Asian source.

Northeast Asia, which regularly imports cargoes from the US and on a smaller scale, from Europe, last year shipped around 19,000 tonnes of SM to the US when severe plant outages caused a dearth in SM cargoes in the region, customs data showed. The spread between CFR China and FOB (free on board) US cargoes during that period stood at around $400/tonne at its widest.

But the market impact of arbitrage trade this time will be mitigated by ample stockpiles in Europe, as US exports to the country have surged in anticipation of the heavy turnaround season, according to some players.

Interest in taking US cargoes to Asia has also dwindled on expectations of possible antidumping duties to be imposed on SM in 2018.

“I think a lot of the supply tightness has already been priced in,” another trader said.

Furthermore, the length of the downtime has led to some scepticism surrounding the flow of cargoes west.

“It is down for just six weeks, by the time the shipment arrives in the US, the plant issues will be resolved,” said a trader.

Shipment of cargoes from northeast Asia to the US takes around one to two months, sources said.

In February last year, Cosmar declared a force majeure on SM supply, while another major US producer America Styrenics, owned by Trinseo and Chevron Phillips, in the same week announced that its SM plant would not be able to restart post maintenance and the shutdown was likely to last one to two months.

Focus article by Deborah Lee

Picture: A container ship at Qingdao port in China. (Source: REX/Shutterstock)