Asian styrene prices rebound from almost two-year lows

Having hit their lowest since January 2021 in early November, Asian spot styrene prices moved higher in the following two weeks. Sentiment remained upbeat following the previous week’s news that China somewhat relaxed Covid-19 curbs. However, there are still concerns with the latest outbreaks in Guangzhou, and new daily infections topping 5,000, which have raised fears of more lockdowns.

The additional spot buying of physical cargoes also pushed both styrene futures and physical spot prices higher last week, traders said. Meanwhile, firmer naphtha prices continue to underpin both benzene and styrene. Asian naphtha prices rose $19/ton on the week to $726/ton CFR Japan on November 17, according to ChemOrbis Price Wizard.

Styrene futures traded stable to higher for most of last week, culminating in an overall weekly gain by Friday. Futures traders placed more calls, aligned with their physical buy positions as they remain optimistic that Covid curbs will be relaxed. The Dalian Commodity Exchange (DCE) December futures closed higher on the week, climbing CNY251/ton ($59/ton) to settle at CNY8293/ton on November 18.

Spot styrene prices were assessed at $1005/ton CFR China on November 18, ticking up $10/ton from the previous week. They rose by a larger amount of $65/ton in the previous week from almost two-year lows.

Benzene futures, however, lost some of the gains from the previous week on profit-taking, said traders. Despite starting on a high note, active selling drove December and January benzene futures lower, from $840/ton to $810-820/ton FOB Korea on the SGX (Singapore Exchange) by November 18.

Spot physical benzene prices fell $15/ton week over week to be assessed at $815/ton FOB Korea on November 18.



Arbitrage window remains closed from Asia to Europe

Traders said that the premium between spot physical and futures prices has remained narrow, while the arbitrage window has also stayed closed between Asia and Europe. The earlier Asia-to-Europe arbitrage trade which had lifted Asian styrene spot prices was short-lived, as demand had slumped in Europe, traders commented. Whilst European spot prices have recovered since end October, the current prices are still not sufficiently high to generate interest in any arbitrage flow from Asia, as the current spread of $120/ton is insufficient to cover freight and handling costs, before any profit can be made.

Spot styrene prices in Europe had climbed from $1075/ton to $1125/ton FOB NWE when Asian styrene prices also tumbled to a low of $930/ton CFR China on October 31, according to ChemOrbis Price Wizard. However, Asian spot prices also recovered to $1005/ton last week.

Forward pricing outlook remains cautious amid unstable demand and China oversupply

The outlook for the year end and even into Q1, 2023 remains uncertain, and will still be tempered by the nascent demand recovery and oversupply scenario in China. Traders said that the forward price curve has flattened for December and January 2023, but has not flipped into contango. It would be dependent on the strength of demand recovery into December and Q1, 2023 to break this backwardation, especially given the likely slow recovery in the downstream PS and ABS markets.

In terms of new capacity additions, the Phase II start-up of Zhejiang Petrochemical’s 1.2 million tons/year of SM in November 2021 placed significant pressure on domestic supply.

Also, a slew of new SM plant start-ups in China since 2021 have lengthened Chinese supply, including Wanhua Chemical Yantai’s new 650,000 tons/year SM facility at Shandong which was started up in late 2021. During the first half of 2021, CNOOC and Shell Petrochemicals’ 630,000 tons/year SM and 300,000 tons/year PO (POSM) facility located at Huizhou, Guangdong were started up in April, while Sinochem Quanzhou’s new POSM facility producing 450,000 tons/year of SM also started up in March.