Asia styrene remains on downtrend amid weak downstream markets

Clive Ong

03-Jun-2014

By Clive Ong

SM is a liquid chemical used to make plastics resins like polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS), as well as synthetic rubbers such as styrene-butadiene-rubber (SBR) and styrene-butadiene-latex (SBL). SINGAPORE (ICIS)–Spot styrene monomer (SM) prices in Asia continued to trend lower this week because of continued weakness in the downstream styrenic resins market, traders said on Tuesday.

SM prices slipped to the low-1,570/tonne CFR (cost and freight) China levels this week, from around $1,587/tonne CFR China a month ago, they said.

“Demand for resins is still weak so far and hence SM is likely to remain under downward pressure,” said an SM end-user in Taiwan.

Coming off a weak first quarter, the economy of China – a key SM market – continues to struggle, with manufacturing activities still sputtering.

The country’s official purchasing managers’ index (PMI) reading for May stood at a five-month high of 50.9, but still barely above the 50 threshold that indicates expansion, while investment HSBC’s final May PMI reading for China still denotes a contraction at 49.4.

China is the world’s second largest economy and is an major importer of petrochemicals in Asia.

Economic recovery in the US and the eurozone remains at a nascent stage, spelling continued poor demand for Asia-made goods and this is weighing down on overall resins consumption.

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

“Orders for finished goods have picked up somewhat, but overall volume remained 10-15% lower than last year,” a south China-based plastics moulder said.

Weak SM offtake resulted in elevated spot inventories in the shore tanks of eastern China this year.

Spot inventories hovered at a record high of around 150,000 tonnes in May. In most years, May stockpiles typically stay below 100,000 tonnes, according to ICIS data.

“The high inventories showed that the market is still unable to digest the inventories while some traders are unwilling to cut losses,” said a Korea-based broker.

China’s tight credit stance adopted this year also hampered trades in the SM market, as participants have been securing less financing for deals.

“Credit is still tight in China and that will continue to rein in traders in domestic and import trade[s],” said a Taiwan-based SM buyer.

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

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