Asia SM-ethylene and SM-benzene at new high

16-Jul-13

The spread between styrene monomer and its feedstock ethylene in Asia surpassed US$500/mt for the first time Monday to hit a record high of US$504/mt, Platts data showed, with the SM market continuing on its bullish streak due to tight supplies in the region. The last record high for the SM-ethylene spread was on July 11, when it stood at US$499/mt. SM consists of about 30% ethylene and roughly 70-80% benzene. A South Korean SM producer said he has never seen such margins before, adding that his company's plant was running at full capacity. Margins are quite good. The [SM] supply is tight until September," the source said. The rallying SM market also caused the SM-benzene to reach a new record high of US$542.50/mt on Monday, surpassing the previous high of US$536.50 seen just last Friday. This is also sharply higher than the average SM-benzene spread of US$250/mt seen in 2012, which is also considered the typical breakeven level for SM producers. The main reason for the firm SM market this year has been the unusually large number of scheduled turnarounds in the first half of the year, coupled with some unexpected outages -- which has kept regional supply tight and inventory levels low in key consumer China. Meanwhile, Asian ethylene spot prices have broadly been on an uptrend since early May, largely due to strength in the feedstock naphtha market as well as healthy downstream demand from SM, the polyvinyl chloride chain and monoethylene glycol. The rise in ethylene prices has lagged the rally in the SM market so far this year, but Asian steam cracker margins coming under pressure from a very bearish butadiene market, there is impetus for ethylene prices to rise further to keep margins supported, market sources said.