The price of styrene monomer in Asia hit a four-and-a-half-year high of $1,645/mt FOB Korea and $1,672/mt CFR China Wednesday, as the price of feedstock benzene soared to a record high of $1,477/mt FOB Korea on the same day, Platts data showed.
The last time SM was higher was on July 15, 2008, at $1,648.75/mt FOB Korea, while the CFR China price was last higher on July 4, 2008, at $1,675/mt.
Both SM and benzene prices have been climbing up since early June, with SM rising 29% from $1,276/mt FOB Korea on June 1, and benzene jumping 40.7% over the same period from $1,049.50/mt FOB Korea, according to Platts data. The price rise from June till now was mainly due to a shortage of benzene in China -- caused by steam cracker turnarounds -- which in turn led to a shortage of SM, market sources said.
But while benzene remains on a bullish trend, tracking a firm US market, SM may lose some steam with the arrival of winter in China and the northern hemisphere, which typically lowers demand for expandable polystyrene by the construction industry. In addition, exports tend to wane as overseas markets -- such as the US and Europe -- wind down just ahead of the Christmas holidays.
Meanwhile, SM margins have been squeezed with the SM-benzene spread narrowing to its lowest level in four years at $168/mt Wednesday. The last time it was lower was on November 12, 2008, at $152/mt.
Typically, producers of SM seek a spread well above $200/mt over benzene for profitable production, but this also depends on the price of the other feedstock, ethylene. SM consists of about 80% benzene and 30% ethylene.
Based on this calculation and adding a production cost of $150/mt, SM margins turned negative on Tuesday, and on Wednesday were assessed around $10/mt below the breakeven price, at $1,654.70/mt.
Integrated producers of SM -- who base their cost on the price of naphtha as they produce their own benzene and ethylene -- are, however, able to enjoy record-high margins with the SM/naphtha spread at $710/mt on Wednesday. Naphtha followed crude oil prices down Wednesday, shedding $13/mt to $934.75/mt, on a CFR Japan basis. The spread was the widest in over five years as it was last higher than this level on January 17, 2007, at $753.50/mt.
Integrated producers of SM typically require a SM/naphtha spread close to $550/mt for profitable production.
