The spread between styrene monomer naphtha widened to US$627/mt, a new high last seen at a similar level more than five years ago, Platts data showed. The extended spread comes on the back of bullish SM prices this week, pushed up by tight prompt supply of SM and fast rising feedstock benzene prices.
SM rose US$18.50/mt day on day to US$1575/mt FOB Korea and US$1600/mt CFR China Wednesday, while naphtha slipped US$2.75/mt over the same period to US$948/mt CFR Japan. The last time the SM-naphtha spread was at a similar level was September 25, 2007, at US$634.50/mt. At that time SM was at US$1352.50/mt FOB Korea and naphtha at US$718/mt CFR Japan.
The spread between SM and naphtha is vital to integrated producers such as South Korea's Samsung Total, who typically seek a spread of over US$550/mt. Many Japanese producers also look at the naphtha price as a basis for their SM margins. "We need more than $550/mt, but it is a relative figure," an integrated producer said Thursday. "As the naphtha price goes up, the breakeven price also goes up. For integrated SM producers, the SM-naphtha spread is [currently] healthy. The spread SM to benzene and ethylene is not so favorable to non-integrated producers -- they could be losing money."
Non-integrated producers -- who do not produce their own feedstock -- look at the cost of benzene and ethylene to calculate their margins for SM. Based on the latest feedstock prices and a conversion cost of US$150/mt, SM should theoretically be priced above US$1587/mt, US$12/mt higher than Wednesday's assessment price of US$1575/mt FOB Korea. Benzene jumped US$19.50/mt day on day to US$1322.50/mt FOB Korea Wednesday while ethylene dipped US$2/mt over the same period to US$1353/mt CFR Northeast Asia.