Asian styrene-monomer production margin flips into negative for first time in 10 months

15-Jan-14

Production margin for styrene monomer in Asia flipped to negative at the start of the week, as Styrene Monomer prices slipped on weak demand ahead of the Lunar New Year holidays later this month, while feedstock benzene and ethylene stayed firm, Platts data showed. SM is produced from 79% benzene and 29% ethylene. So, based on benzene assessments at US$1352/mt FOB Korea and ethylene at US$1555/mt CFR Northeast Asia, the breakeven cost for producing SM should be US$1669/mt -- after including a conversion cost of around US$150/mt. This is US$10/mt above Monday's assessed SM price of US$1659/mt FOB Korea. SM margins have been unusually strong for much of 2013 and the last time SM was assessed below its breakeven cost was on March 6, 2013, when it was assessed at US$1629.50/mt FOB Korea, while its breakeven cost was US$1630.90/mt. SM was priced at US$701.50/mt above naphtha on Monday with naphtha assessed at US$957.50/mt CFR Japan. Market sources said that the breakeven price for producing SM, if based against naphtha cost, is US$550-600/mt depending on age of the plant. SM prices have softened in January due to lower demand from end-users in China ahead of the Lunar New Year holidays which will start at the end of this month. Chinese factories typically shut down or lower operating rates during the period as millions of workers travel to their hometowns all over China. But prices could recover post the Lunar New Year holidays amid tightening supply, as firming SM values in the US and Europe has shut arbitrage flows into Asia completely and as the turnaround season among SM producers in Japan, South Korea and China will begin.