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| Asian styrene monomer falls to near 2-year low on weaker than expected EPS demand |
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| News Source：http://www.jinchemical.com/
; SendDate：2014-9-10 15:40:22 |
Asian styrene monomer fell to its lowest level in nearly two years on Wednesday amid weak downstream demand -- especially from the expandable polystyrene sector, sources said Thursday.
Platts assessed the markers at $1,504/mt FOB Korea and $1,530/mt CFR China, both down $11/mt day on day. The last time prices were any lower was on October 4, 2012, when FOB Korea was assessed at $1,493/mt and CFR China at $1,513/mt, data showed.
SM prices have been on a downtrend since July, falling 7.9% after hitting a high of $1,633/mt FOB Korea and $1,658/mt CFR China on July 23, data showed.
Demand in September was lower than expected, especially from expandable polystyrene producers, who have recently been selling their feedstock SM cargoes in the spot market, said market sources.
Market participants may have already "given up" on SM this year as September had started without any notable uptick in EPS demand, a Northeast Asian trader said Wednesday. He explained that EPS demand was low due to a slump in China's property market, which typically sees increased activity in the warmer months that diminishes gradually as winter sets in.
"The demand situation is much worse than I expected; there are no buyers," the trader said.
The construction industry, for example, uses EPS as insulation in buildings.
China's home prices fell for the fourth month in a row in August, AFP reported earlier, citing China Index Academy data. Furthermore, contracted sales for the residential property market in China decreased by 10.5% year on year to Yuan 2.99 trillion ($490.16 billion) for the first seven months of 2014, down from Yuan 3.34 trillion in the same period last year, according to a report by ratings agency Moody's, Platts reported earlier.
SM-ETHYLENE SPREAD DETERIORATES FURTHER
The spread between SM and one of its feedstocks, ethylene dropped further into negative territory Wednesday falling $11/mt from Tuesday to minus $26/mt Wednesday -- the lowest in over four years, Platts data showed.
On Wednesday, ethylene was assessed at $1,530/mt CFR Northeast Asia while SM was at $1,504/mt FOB Korea. The last time the spread was any lower was on May 26, 2010, when SM was at $1,1028/mt FOB Korea and ethylene at $1,089/mt CFR Northeast Asia, taking the spread to minus $61/mt.
Due to a weak benzene market, however, the spread between SM and its main feedstock on Wednesday remained near what is typically described as a "profitable" level for SM production of $238/mt.
But to calculate production profitability for SM, we need to take into consideration ethylene prices as well. SM is made of about 79% benzene and the rest ethylene, while production costs are typically estimated around $150/mt.
This takes the breakeven value for producing SM at current feedstock prices to $1,593.80/mt.
So, based on Wednesday's assessed prices and a conversion cost of $150/mt, SM spot prices were $89.80/mt below breakeven level Wednesday.
According to Platts data, the last time SM prices were were above breakeven level was on May 20 this year, assessed at $1,567/mt FOB Korea.
But integrated producers of SM, who base their cost on naphtha, should still be able to produce with a profit as the SM-naphtha spread was last assessed at $616.10/mt with naphtha at $887.90/mt CFR Japan.
Due to the negative margins for non-integrated producers, several producers in China, South Korea and Japan have lowered SM operations or shut down plants in recent months, trade sources said. |
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