Asian styrene prices recover on firm benzene, short-covering

Asian spot styrene prices rebounded following the Labour Day holiday, where Chinese market participants took nearly a week-break. Styrene prices dived below $1300/ton CFR China prior to the holiday. Traders said there are still June short positions that have not been covered. Short covering sentiment and more buyers chasing offers lifted June and July paper prices higher.

Traders said that the price volatility has remained high this week as most traders were focused on technical factors such as oil and benzene futures, which have jumped due to strong South Korean buying. This week’s daily styrene closing prices reflect these technical movements, such as Monday’s strong rebound, Tuesday’s price fall due to profit taking, and the benzene-driven rebounds on Wednesday and Thursday. Asian benzene futures traded up from $1180/ton FOB Korea to $1210/ton FOB Korea on the SGX on May 12.

Spot styrene prices were assessed at $1320/ton CFR China on May 12, rising $40/ton from the pre-holiday levels in late April.



Asian naphtha-to-styrene spread remains healthy

The spread between styrene monomer and naphtha feedstock has improved substantially since late November 2021, and the production margin remains healthy. Then, the spread between styrene monomer and naphtha had plummeted to $306/ton on November 22, 2021, ChemOrbis Price Wizard showed. The $306/ton spread was razor-thin, given that the naphtha price was $740/ton CFR Japan, and styrene was $1046/ton CFR China.

Styrene prices have recovered sharply since, driven by concerted efforts of regional producers, including those in South Korea, Taiwan, Japan and Southeast Asia, to cut cracker run rates, or even shut down production for extended periods. Meanwhile, higher crude oil and naphtha prices since the start of the Russia-Ukraine war have also boosted styrene prices.

Currently, cracker run rates and styrene plant operating rates are still at reduced levels. There has been a slight increase in cracker run rates due to some cracker restarts, such as Taiwan’s state-owned CPC, which has just restarted its No 4 Linyuan based-naphtha cracker, following a maintenance turnaround on April 20. South Korean producers, including LG Chemical, KPIC and Hanwha Total are currently operating at 80-85% rates. YNCC will also likely maintain the current operating rate at 85% at all its crackers, according to industry sources.

The spread between styrene and naphtha feedstock currently stands at $399/ton, with naphtha price at a weekly average of $921/ton CFR Japan, according to ChemOrbis Price Wizard.

Integrated producers of styrene typically require a spread of around $400-450/ton to naphtha to produce profitably, industry sources said. The current spread between naphtha feedstock and styrene reflects a break-even margin for some producers at least. This may vary between producers. Some producers claim the break-even level may be closer to $450/ton due to higher energy prices, which have increased the general cost of production.

There are other producers who also look at the spread between styrene, benzene, and ethylene. Margins have improved, from the ethylene feedstock perspective, with current ethylene prices now falling below $1200/ton CFR NEA, from previous highs above $1300/ton CFR NEA, between March to mid-April. Benzene prices however, have climbed from $1075/ton FOB Korea in mid-March to above $1200/ton FOB Korea currently. Styrene comprises around 80% benzene and 30% ethylene.

“In terms of managing styrene production costs, falling ethylene feedstock prices will continue to be supportive, despite the current gyrations seen in benzene feedstock prices. It remains critical that producers continue to manage the region’s surplus capacities through reduced cracker and styrene plant operating rates, and lower inventory levels,” a Western trader commented.