Benzene has strengthened in Asia with support from arbitrage openings to the US and Europe, while SM is struggling with poor downstream demand. As a result, the price spread between styrene monomer and its main feedstock benzene has narrowed to its lowest level since late January, Platts data shows.
As SM fell by four dollars last week to US$1311/mt FOB Korea, and benzene rose by US$11/mt to 1093/mt FOB Korea from Thursday, the spread narrowed to US$218/mt on May 25, the lowest since January 25 when it was US$216/mt. SM producers typically target a spread of US$240-250/mt over benzene to keep margins healthy, but this also depends on the ethylene price, as SM production uses roughly 80% benzene and 30% ethylene. Based on the most recent prices of benzene, and ethylene at US$1015/mt CFR Northeast Asia, and production cost at US$150/mt, SM was a marginal $3.20/mt above breakeven on Friday. The margin remains positive due to an unusually wide spread between SM and ethylene, US$296/mt, the widest since September 21 last year when it was US$304/mt.
Benzene prices have been firmer due to arbitrage opportunities from Asia to the West. European benzene for June arrival closed Friday at US$1327.50/mt CIF ARA. With freight estimated at US$85/mt, Asian cargoes could arrive in Europe at US$1178/mt CIF, netting traders US$149.50/mt if they take advantage of the arbitrage. In USA, June benzene was assessed at 416 cents/gallon FOB US Gulf last Friday (US$1184.87/mt). With freight estimated at US$60/mt, Asian cargoes could arrive at US$1153/mt, giving traders a profit of US$32/mt.