Tight supplies, weak benzene prop margins for non-integrated styrene monomer to10 month highs

16-Feb-15

Margins for non-integrated styrene monomer producers propped up to an almost 10 month high in the middle of last week, amid a weaker feedstock benzene market and tightening supply ahead of a busy turnaround season in South Korea in March, as per Platts. Over 75% of South Korea's total production capacity will be shut from March to June- equalling six of the 8 SM plants, with an estimated loss of production in March is at around 194,550 mt. This is much greater than the volume of arbitrage cargoes from the US and Europe seen heading to Asia in March, at around 25,000-40,000 mt, and new supply from plant startups in Q1-2015 estimated at 31,000 mt/month. China's Shandong Yuhuang Chemical Ltd. is starting up its new 240,000 m tpa SM plant in Shandong province over February-March and China National Offshore Oil Corp. its new 120,000 m tpa SM plant in Hainan in February. Demand for SM is seen likely to improve further as the weather turns warmer in spring, boosting the currently sluggish downstream expandable polystyrene market as construction activity resumes after winter, market sources said. Relatively low SM inventory levels in East China also point to an uptick in demand for SM in the near term, with Chinese SM end-users typically stockpiling ahead and after the Lunar New Year holiday.A weaker main feedstock benzene market was also widening SM margins, with healthy ethylene and paraxylene margins adding to the glut of benzene supply, a Chinese market source said. As Asia-US benzene arbitrage window shut recently and healthy PX and ethylene margins are likely increasing benzene output in Asia, indicating the benzene market may remain bearish on oversupply for some time, a market source in Shanghai said.