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Asian styrene prices slide further on falling naphtha, benzene

by Jennifer Lee -
  • 19/08/2022 (15:34)
Asian spot styrene prices fell for the third straight week, driven lower by the downslide in naphtha and benzene feedstock. This week, styrene prices traded lower as the correction in oil prices pulled both naphtha and benzene prices lower.

Styrene futures traded down from Monday through to Thursday, tracking lower naphtha and benzene futures. Futures traders have been bearish and risk aversion has dominated trading most of the week. Traders preferred to sell, placing more put positions as risk aversion ascended.

Spot naphtha prices have fallen sharply since early March, plummeting $440/ton or nearly 40% from $1108/ton CFR Japan, to $668/ton CFR Japan on August 19, according to ChemOrbis Price Wizard.

Benzene futures tracked falling oil futures, trading lower from Monday through to Thursday. Traders were said to be either liquidating their positions, or short-selling September and October futures. Asian benzene futures traded down from $960-970/ton FOB Korea, before settling lower at around $870-880/ton FOB Korea on the SGX on August 18.

Asian physical benzene spot prices fell $70/ton from the previous week, or 7%, to $890/ton FOB Korea on August 18, according to ChemOrbis Price Wizard. Spot styrene prices were assessed at $1025/ton CFR China on August 18, falling $65/ton or 6% on the week.

styrene – CFR China

China’s major producers cut operating rates

Sluggish demand has led to rising styrene inventories along East and South China’s tank terminals. The bearish downstream ABS and PS markets dampened buying sentiment for the styrene feedstock, and several Chinese producers have reportedly cut operation rates further, to alleviate the pressure on lengthening supply and bolster local prices.

Changzhou New Solar Chemical has cut operating rates to 70-75% at its 300,000 tons/year SM plant located in Jiangsu due to poor economics, traders said. SP Chemical, a styrene and VCM producer, has also reduced operating rates at its 320,000 tons/year SM plant located in Taixing.

Ningbo ZRCC Lyondell Chemical, a joint venture between Sinopec and LyondellBasell, started up its new POSM facility located in Zhenhai, Ningbo in January 2022. The facility produces 300,000 tons/year of PO and 600,000 tons/year of SM. The producer has also cut production by 20%. The average run rate for China’s styrene plants is around 75%, according to traders.

Asian naphtha-to-styrene spread narrows

Falling naphtha prices have alleviated production costs for regional styrene producers, and continue to underpin Asian styrene spot prices. However, the sharper decline in Asian styrene prices has narrowed the production spread between styrene and naphtha feedstock.

The spread between styrene and naphtha feedstock currently stands at $357/ton, with naphtha price at a weekly average of $668/ton CFR Japan, according to ChemOrbis Price Wizard. Given that the average production margin is $350-450/ton, the narrower spread has caused less efficient producers to operate at even negative margins.

“Integrated styrene producers were enjoying higher margins when styrene prices had skyrocketed in early June, and margins had stayed positive for over the past two months as naphtha prices traded around $775-850/ton range. With styrene prices tumbling from the peak of $1500/ton CFR China in early June, producers have struggled with narrowing spreads. Should styrene prices fall below $1000/ton CFR China, there will be deeper production cuts or extended shutdowns, as styrene producers are unlikely to continue operating at a loss,” noted a trader.
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