Asian SM-ethylene spread dips to 3 year low on increasing inventory of Styrene Monomer in China

04-Mar-14

The spread between styrene monomer and one of its feedstocks, ethylene, in Asia narrowed to its lowest level in almost three years Thursday, at US$59/mt, amid increasing inventories of SM in China, as per Platts. SM was assessed US$7.50/mt lower day on day at US$1559/mt FOB Korea at the Asian close Thursday, while ethylene was stable at US$1500/mt CFR Northeast Asia. On April 12, 2011, the spread stood at US$53/mt. The spread has narrowed by US$122/mt or 67.4% since January 2 this year. Asian SM prices have fallen in 2014 with downstream end-users in China -- the biggest consumer in the region -- lowering operating rates ahead of and during the Lunar New Year holidays, which were celebrated over January 31-February 6. SM started the year at US$1691/mt FOB Korea on January 2, but has tumbled US$132/mt or 7.8% since then. Demand in China has remained weak after the holidays as downstream operating rates have been slow to pick up. Sources this week estimated the inventory of SM held by traders in East China at around 170,000-180,000 mt, up from about 160,000 mt last week. This week's inventory level is the highest since Platts began publishing the data in December 2006. Meanwhile, the total inventory held by both traders and end users in East China was estimated at close to 320,000 mt this week. In comparison, ethylene has not fallen by as much as SM this year; it is down only US$10/mt, or 0.7%, since starting the year at US$1510/mt CFR Northeast Asia on January 2. The main reason for the stability in the ethylene market is the upcoming steam cracker turnaround season in Asia over March-May.