China SM soars on low supply, strong demand; Dec outlook uncertain

Author: Tina Zhang

2020/10/30

SINGAPORE (ICIS)--China’s domestic styrene monomer (SM) prices surged in October on a combination of low supply, robust demand and strong gains in the futures market.

This market condition is likely to stay in November, but the supply outlook in December is more uncertain on likelihood of more imports following recent price spikes and increased domestic output.

On 29 October, SM ex-tank average prices in east China closed at yuan (CNY) 6,890-7,150/tonne, up by 30% from the late September, according to ICIS data.

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Inventories at east China ports may fall further in November given expectations of continued strong demand.

Downstream producers may still be able to maintain high operating rates given healthy production margins and limited inventories of finished products amid healthy orders, which may persist into the second half of November.

On the supply side, domestic output will decrease in November due to scheduled turnarounds.

Jiangsu Leasty will shut one 200,000 tonne/year SM line early next month for about 45 days of maintenance, while Shanghai SECCO Petrochemical’s 670,000 tonne/year plant will also shut from mid-November for the same duration.

Import arrivals in October-November may mostly be the annual contract volumes for downstream producers and the volume is likely to drop from the average of 236,972 tonnes in August-September, when uncompetitive prices attracted limited import offers into China and importers also showed limited buying sentiment.

The outlook in December is more uncertain.

The spikes in domestic prices in October have opened the arbitrage window between China and Europe, meaning more buying interest in the import market. This, together with firmer prices in other regions of Asia, may bring more cargoes from Europe and the US into Asia.

In addition, the price rally has helped standalone SM producers in China to shrug off losses and they may therefore be able to maintain operation in the near term.

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Abel Chemical may resume production at its 250,000 tonne/year unit soon although the specific date is not clear, while Tangshan Risun Petrochemical’s new 300,000 tonne/year SM unit is likely to achieve stable production in the second half of November.

Focus article by Tina Zhang

ICN

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