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Asian styrene prices rebound on increased demand, short-covering

by Jennifer Lee -
  • 26/09/2022 (02:26)
Asian spot styrene prices managed to reverse the previous decline last week, lifted by firmer benzene feedstock and renewed demand, as buyers build more styrene inventories ahead of the upcoming October Golden Week holiday. The recent uptick in consumer buying finally led to lower shore inventories.

Short-covering by major traders of both benzene and styrene futures have pushed physical prices higher, traders said. Meanwhile, firmer naphtha prices also underpinned the benzene and styrene price upturn. Asian naphtha prices edged up $12/ton on the week to $678/ton on September 22, according to ChemOrbis Price Wizard.

Styrene futures climbed from Monday through to Thursday last week. Futures traders placed more calls to cover their shorts, as risk aversion also receded. The Dalian Commodity Exchange (DCE) October futures closed higher through the week, climbing from CNY9000/ton on Monday, to CNY9096/ton on Thursday, rising CNY252/ton ($37/ton).

Benzene futures traded higher from early Tuesday, and climbed higher on Wednesday, lifted by firmer crude oil futures. Sentiment turned bullish on Wednesday’s crude oil hikes, with the strong buying driving up October benzene futures from $920/ton to $930/ton FOB Korea on the SGX (Singapore Exchange) by September 22.

Spot physical benzene prices rose $15/ton from last week, and were assessed at $910/ton FOB Korea on September 22. Spot styrene prices were assessed at $1150/ton CFR China on September 22, rising $30/ton from last week.

styrene - CFR China

Non-integrated SM producers face margin squeeze from higher benzene

The recent recovery in Asian benzene feedstock prices have begun to pressure several non-integrated styrene producers as their production costs have been climbing over the past weeks. Benzene comprises 80% of styrene production while ethylene only comprises 30%. Ethylene prices have also recovered over the past three weeks due to an uptick in buying to cover some shortfalls in Northeast and Southeast Asia.

With current benzene spot prices at $920-930/ton FOB Korea, benzene production costs have risen to $735-745/ton. Ethylene prices, meanwhile, have risen to $930-950/ton CFR NEA level, and contribute around $280-285/ton to styrene production costs.

“With current benzene feedstock at higher levels, production costs for standalone styrene producers are at break-even or for some, have turned negative. These producers may likely cut styrene production further,” said a trader.

Asian naphtha-to-styrene spread narrows

Meanwhile, naphtha prices have continued to underpin Asian styrene futures and spot prices. The spread between styrene and naphtha feedstock has been narrowing, reflecting lower production margins in recent weeks. Production margins however, have shown great improvement since late November 2021. Then, the naphtha-to-styrene spread had plummeted to $306/ton on November 22, 2021, with naphtha at $740/ton CFR Japan, and styrene at $1046/ton CFR China, ChemOrbis Price Wizard showed. The production margin had turned negative, given that the average spread required was $400-450/ton.

The spread between styrene and naphtha feedstock currently stands at $472/ton, with naphtha price at a weekly average of $678/ton CFR Japan, according to ChemOrbis Price Wizard.

“Integrated styrene producers and several standalone producers are still enjoying some margins over the past two months as naphtha prices have traded at around the $680-770/ton range. Integrated producers of styrene typically require a spread of around $400-450/ton to naphtha to produce profitably. Producers are currently still securing margins of $40-50/ton,” noted a trader.
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