Argus DeWitt
Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Highlights
Market snapshots
Global benzene prices
Americas
„„ Benzene fell on weaker demand and a closed Asia-Pacific
arbitrage.
„„ Styrene declined amid sluggish demand from Europe, AsiaPacific.
Europe
„„ Benzene contract price falls in August as upstream markets
weaken.
„„ Styrene August contract price down by €25/t from July.
Asia-Pacific
„„ Benzene fell on crude futures and stable to weak fundamentals.
„„ Styrene monomer extended losses on weak demand but
tight supplies slowed the price falls.
Contents
Global prices
Americas
Europe
Asia-Pacific
USGC
Mid
±
Americas
fob USGC contract
Aug
838.04
838.04
838.04
-74.83
fob USGC spot
Prompt
766.21
793.15
779.68
-59.11
Europe
cif NWE contract
Aug
853.00
853.00
853.00
-29.00
cif ARA spot
Prompt
805.00
855.00
830.00
-22.50
cfr South Korea contract
Aug
770.00
777.42
773.71
-44.64
cfr Taiwan contract
Aug
770.00
786.42
778.21
-44.64
770.00
781.42
775.71
-44.64
Asia-Pacific
cfr Asean contract
Aug
fob South Korea
Marker
cfr China
Prompt
710.00
723.05
-36.70
735.00
-25.00
Asia- Western
Pacific
Europe
US Gulf
coast
760.00
Benzene breakeven price from toluene conversion
Process
$/t
STDP
547.73
637.22
602.22
TDP
541.32
737.02
778.02
HDA
803.13
921.88
977.42
Global styrene prices
South Korea
USGC
2,000
Rotterdam
$/t
E China
S Korea
1,500
1,500
1,250
hhh
1,000
hhh
1,000
500
0
14 Aug 14
High
Argus DeWitt is a leading independent source of pricing data and
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$/t
ARA
Low
About Argus DeWitt
2
3
4
6
Global benzene prices
$/t
Timing
750
11 Dec 14
Copyright © 2015 Argus Media Ltd
9 Apr 15
6 Aug 15
8 Jan 15
19 Mar 15
28 May 15
6 Aug 15
Argus DeWitt Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Global Prices
$/t
cif ARA spot
fob USGC spot
779.68
830.00
u
u
fob South Korea
USGC benzene premium to USGC gasoline
¢/USG
723.05
u
Global naphtha prices
250
600
200
550
$/t
500
150
hhh
100
450
hhh
400
50
87M gasoline = 0
350
21 May
0
4 Sep
25 Nov
19 Feb
14 May
6 Aug
ARA benzene premium to NWE naphtha
Singapore
$/t
800
600
600
hhh
200
Naphtha 65 Para NWE
6 Aug
USGC
400
$/t
hhh
200
NWE naphtha = 0
Benzene = 0
0
14 Aug 14
13 Jul
South Korea styrene premium to benzene
800
400
17 Jun
0
11 Dec 14
Copyright © 2015 Argus Media Ltd
9 Apr 15
6 Aug 15
4 Sep 14
Page 2 of 9
25 Nov 14
19 Feb 15
14 May 15
6 Aug 15
Argus DeWitt Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Americas
Americas prices
Benzene
The August benzene contract price settled 25¢/USG lower at
280¢/USG on 31 July. After the contract settlement, spot prices weakened with very little volume traded. With many market participants away on summer holiday, and general negative
sentiment in energy markets, most remained sidelined for
much of the week. The price of August ddp barrels trended
lower with energy prices, falling from 265¢/USG on 3 August
down to 256¢/USG on 5 August. September barrels traded at a
very slight discount to August, but the level of backwardation
diminished. Lower Mississippi River discussions resumed at
the typical 2-3¢/USG premium to their ddp Houston/Texas City
counterparts for both the front and forward months.
Octane demand in the US has been extraordinary this year.
According to the EIA, year-over-year gasoline demand is 3.2pc
higher, but still just 0.2pc above the ten-year average. Premium gasoline demand is 12.2pc higher and 14.5pc above its
10-year average. Premium gasoline now accounts for 10.8pc
of total gasoline supplied. Furthermore, an abundance of
low octane naphtha required additional octane to blend it
away into the motor gasoline pool. Light naphtha discounts to
gasoline widened to unprecedented levels, enabling blenders
to pay more for high octane blendstocks.
These trends boosted demand for high-octane reformate,
and, and one would expect supplies of co-product benzene
from reformate extraction as well. AFPM statistics released
last week partly disproved that theory. According to the AFPM’s report that published petrochemical production statistics
through June, year-over-year benzene production from reformate was just 2.6pc higher and total domestic benzene output
actually declined by 0.3pc, or -9,000t. High cost toluene led
to sharp reductions in conversion rates offset the increased
production from reformate extraction.
Meanwhile, benzene demand from styrene increased by
20,000 t or 1.1pc, cumene by 60,000t or 6.0pc and aniline by
29,000t or 7.8pc.
Imports balanced the market. An examination of trade on
a benzene equivalent, which measures traded volumes on a
contained benzene basis, the US imported 1.225mn t, which
represents a year-over-year increase of 209,000t. Over the
same period, the US exported 835,000t, which represents an
increase of 119,000t. Through May, the US increased its net
import position by 90,000t.
Roughly 70,000t of benzene was heard exported from
Copyright © 2015 Argus Media Ltd
Timing
Low
High
Mid
±
Benzene ¢/USG
fob USGC contract
Aug
280.00
280.00
280.00
-25.00
fob USGC spot
Prompt*
256.00
265.00
260.50
-19.75
+8.00
Styrene ¢/lb
fob USGC contract
Jul
64.50
66.00
65.25
fob USGC spot
Prompt*
54.43
55.11
54.77
0.00
fob USGC VWA
Jul
55.98
0.00
USGC large buyer index
Jul
53.64
-0.15
Cumene formula ¢/lb
fob USGC contract
Jul
36.67
36.67
36.67
+2.67
Aug
70.50
73.50
72.00
-3.00
fob USGC contract
Aug
273.00
273.00
273.00
-20.60
Marker with NG escalator
Aug
255.00
255.00
255.00
-20.90
Phenol ¢/lb
fob USGC contract
Cyclohexane ¢/USG
*Prompt refers to current month, but if the publication date is on or after the 15th
of a given month, then the spot posting will include current month and next month
trades
Benchmark margins
¢/USG
Margin
±
BTX US reformate extraction vs floor contract
63.41
-23.41
BTX US reformate extraction vs floor spot
60.63
-22.66
BT US reformate extraction vs floor contract
63.83
-22.17
BT US reformate extraction vs floor spot
58.95
-20.86
USGC styrene premium to benzene
$/t
700
600
500
400
hhh
300
200
Benzene = 0
100
22 Jan
26 Mar
28 May
30 Jul
South Korea to the US in July, with more South Korea supply heard shipped to Taiwan instead – about 90,000t. Traders
looked for alternative destinations for incremental barrels as
Page 3 of 9
Argus DeWitt Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Americas
Chinese demand for imported benzene waned. Backwardation in the benzene and styrene markets discouraged more
volumes from being shipped to the US, even as cumene, aniline and polyurethane demand remains strong. In addition use
in phenol production, sizable quantities of cumene have also
been used as blendstock for gasoline this year.
Styrene
Styrene weakened in a thinly traded market as market players
eyed Europe for export opportunities as it remains the highest
netback. Traders and producers continued to monitor Asia-Pacific for consistent buying interest amid volatility in the China
stock market as inventory levels there were heard low.
Discussions were wide this week amid market volatility in
Europe and Asia-Pacific. September fob was reportedly offered
at 53.30¢/lb ($1,175/t). Bids were pegged in the low $1,100s/t
from Europe and in the sub-1,100s from Asia-Pacific. Traders
and producers were offering August volume, and producers
were also looking to move product for September lifting.
Most producers were last head running at high rates as domestic market demand remained supportive in spite of a quiet
export market. Shell Canada’s Scotford styrene unit was last
heard still under force majeure for supply out of its 450,000 t/
yr unit leading to reconfiguration of shipping patterns to serve
upper Midwest and west of Rockies consumers.
Downstream polystyrene (PS) demand is largely firm in
July, in line with the seasonal trend, but is ultimately expected to weaken compared to June – which rose 7.3pc – according
to revised statistics from the ACC Plastics Industry Statistics
Group as compiled by Veris Consulting. Sales are 0.4pc higher
year-to-date compared to 2014 levels. GPPS sales stood 2.4pc
higher, while HIPS fell 2.6pc compared to 2014.
Food-packaging and service sales rose 3.1pc compared to
2014, but consumer and institutional sales fell by 12.8pc as
product sales likely transferred to polypropylene given the more
competitive pricing. Additionally, electrical and electronic market sales fell 3.6pc, but compounders sales rose 3.5pc compared
to 2014. Sales to resellers increased 9.1pc, and prime sales
moved 6.8pc higher while off-grade sales rose 13.2pc.
Most other derivatives remain strong. Unsaturated Polyester Resins, or UPR, coatings and construction segments of
expandable polystyrene business remain particularly strong.
The carpet backing segment of styrene butadiene latex is
notably weak.
Europe
Europe prices
Benzene
The August contract price (CP) was settled at $853/t and
€779/t, a fall of $29/t and €13/t, respectively, from the July
CP. This was based on an exchange rate of $1.0955/€1 and was
broadly in line with the movement in spot prices, which were
weighed down by weaker crude and naphtha values. Spot
prices lost further momentum after the August CP settlement
as the upstream weakness persisted. August cargoes traded
down from $855/t on 31 July to $830/t on 3 August, then to
$805/t on 4 August. Product for first half of August shipment
was discussed at a $5-10/t premium to any August delivery.
The September market was tentative, and was mostly indicated at a $10-25/t discount to August. Overall trading was slow
as demand downstream eased because of seasonal factors and
plant turnarounds. Styrene plants in Germany and Belgium
will be down in September for planned maintenance, while
phenol units in Germany, France and Poland are off line for
some weeks in August and September for scheduled work.
Europe again outperformed the US and Asia and has been
Copyright © 2015 Argus Media Ltd
Timing
$/t
Low
€/t
High
Low
High
Benzene
cif NWE contract
Aug
853.00
853.00
779.00
779.00
cif ARA spot
Prompt*
805.00
855.00
738.00
783.00
1,325.00
1,325.00
Styrene
fca Rotterdam contract
Jul
1,446.21
1,446.21
fob Rotterdam contract
Aug
1,418.92
1,418.92 1,300.00 1,300.00
fca Rotterdam spot
Prompt*
1,298.86
1,320.69
1,190.00
1,210.00
fob Rotterdam spot
Prompt*
1,270.00
1,275.00
1,164.00
1,168.00
Aug
1,352.34
1,352.34
1,239.00
1,239.00
Aug
1,018.35
1,018.35
933.00
933.00
Phenol
delivered ARA contract
Cyclohexane
fob ARA contract
*Prompt refers to current month, but if the publication date is on or after the 15th
of a given month, then the spot posting will include current month and next month
trades
the highest priced benzene market globally so far in August.
Demand in the region has weakened but supply has also
Page 4 of 9
Argus DeWitt Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Europe
fallen. Imports are limited as the arbitrage from the US to
Europe is closed. The arbitrage from Asia to Europe opened
briefly on paper and then shut as Asian prices regained some
ground following heavy losses. Cracker operations continue
to be impacted by persistent high temperatures and are losing volumes, particularly in southern Europe. Some crackers
in northern Europe, mainly in Germany, are also affected.
Operations at the Lavera cracker continue to improve, but
run rates remain reduced because of technical issues. A UK
cracker is down for planned maintenance. Ethylene supply in
Europe is tightly balanced. Production from hydrodealkylation
(HDA), which accounts for 10pc of European benzene capacity, remains lacking as the low benzene-toluene spread makes
HDA economics negative. Benzene supply from reformate
has increased as refineries run hard following the sharp fall in
crude prices. A 265,000 b/d refinery in Germany will be down
for maintenance from late-August or September.
North Sea Dated crude fell below $50/bl and traded around
$49/bl throughout the week, the lowest in six months, amid
escalating worries about the global oil supply glut ahead of the
potential return of Iranian exports and amid the slowdown in
the Chinese economy. Naphtha fell in line with crude, reaching $430/t on Wednesday, also a six-month low. Benzene’s
premium over feedstock naphtha remained healthy at above
$300/t despite the recent weakness in both products. The
euro weakened against the US dollar to $1.08-1.09/€1 after a
pick-up in US business activity and improved employment data
in July.
The latest monthly Purchasing Managers’ Index (PMI) in the
eurozone showed business growth accelerating in July from
June, exceeding market expectations, suggesting that the
recovery in the region is on track and has not been affected by
the Greek debt crisis.
Styrene
The August contract price was settled at €1,300/t ($1,417/t)
fob, down by €25/t from July, tracking the fall in feedstock
cost. Spot prices weakened in a thin and slow market.
Trades for August were few and were concluded at $1,2701,275/t early in the week. September traded at $1,220/t and
$1,260/t. Prompt bids and offers that followed remained on
a downward path and were last discussed at around $1,2701,290/t and $1,300-1,320/t, respectively. Buying interest for
September product is sparse as consumers are reluctant to
Copyright © 2015 Argus Media Ltd
Premium of European styrene to benzene
$/t
900
720
540
360
180
0
Jan 15
Feb 15
Mar 15
Apr 15
May 15
Jul 15
Styrene raw material costs and pricing
Benzene mthly cont x.793
Styrene mthly contract
Aug 15
€/t
Ethylene cont x.293
Styrene spot fob
1,600
1,280
960
640
320
0
Aug 14
Oct 14
Dec 14
Feb 15
Apr 15
Jun 15
Aug 15
commit in a falling market. The backwardation into September narrowed to around $20-25/t, a range that could narrow
further ahead of turnarounds in Germany and Belgium.
Between 20,000t and 30,000t of styrene cargoes were fixed
in Houston for late-July and first half of August shipment to
the ARA region. Additional US imports are expected to arrive
in the second half of the month. Persistent high temperatures are impacting operations at production plants. Overall
availability is curbed but still sufficient to meet demand,
which is also falling seasonally as production down the chain
is traditionally either cut back or shut altogether for around
two to three weeks during August. Styrene units in Germany
and Belgium will be off line for turnarounds next month but
some downstream units could also be shut at the same time,
limiting the impact on availability. Low water levels on the
Rhine river, triggered by the hot and dry weather, are delaying
Page 5 of 9
Argus DeWitt Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Europe
NWE styrene premium to benzene
$/t
1,000
cif ARA benzene premium to Eurobob
$/t
600
500
800
400
600
hhh
300
hhh
200
400
100
Benzene = 0
200
29 Jan
Eurobob = 0
0
2 Apr
4 Jun
6 Aug
14 Aug 14
deliveries in some areas and bolstering freight costs.
But styrene producers are aiming to run plants as hard
as they can. Styrene’s premium to feedstock benzene has
remained well above $400/t so far in August, levels that have
persisted since February.
Cyclohexane
The August contract price fell by €13/t to €920/t, in line with
the fall in benzene. Demand is slowing as expected at this
time of the year, while feedstock costs continued to falter,
weighing on CX prices.
11 Dec 14
9 Apr 15
6 Aug 15
Phenol
The contract reference price for phenol dropped by €13/t to
€1,239/t in August. Supply is sufficient despite turnarounds.
A German unit is expected to be back up in the first week of
August after a two-week planned shutdown. Units will be
shut in France and Poland for scheduled work in August and
September. The production unit in Finland that was affected
by issues recently is running normally. The acetone market is
weakening as a result of poor demand and ample supply, and
this could influence some producers to reduce output, curbing
phenol production in the process.
Asia-pacific
Benzene
A fall in crude futures influenced the downturn in Asian benzene
prices during the past week. Sentiment turned bearish with the
decline in wider energy values and underlying concerns resurfaced about weak regional demand. Discussions in the spot market were limited as most buyers were unsure of the short-term
direction, while sellers made efforts to maintain prices above
$700/t fob South Korea.
Trading for September and October-loading cargoes was
limited. A deal was done for September at $703/t on Tuesday
and again at $722/t on Thursday. Discussions for September fell
sharply to $703-709/t levels on Tuesday from $760-770/t seen last
Friday. Prices recovered some ground on Wednesday but by the
week’s close on Thursday prices again fell back as crude futures
remained on a downtrend. Discussions for September were in a
Copyright © 2015 Argus Media Ltd
$715-722/t range, while October prices were at $707-714/t. The
September-October intermonth spread remained at a backwardation ranging between $4.50-8/t. Some interest to buy secondhalf August loading cargoes remained in the market, with one
deal at $777/t on 31 July.
Benzene supplies in the region for August are balanced.
The overall supply availability was scheduled to rise in the third
quarter of the year as regional plants are running well and
Chinese demand is weak. But some of the excess in northeast
Asia has been absorbed by the strong demand from the styrene
monomer (SM) sector. Demand from SM producers has been on
the rise in the past month as SM plants resumed operations after
the turnaround season. SM margins have also been robust with
the benzene-SM spread remaining above $442/t in the past week.
Benzene supplies have also been absorbed by unexpected de-
Page 6 of 9
Argus DeWitt Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Asia-pacific
mand from Taiwan because of continuing turnaround at Formosa’s
No.2 aromatics unit. The Mailiao plant, producing 470,000 t/yr of
benzene, is shut for maintenance since early July and is expected
to resume production in end August after about a 45-day turnaround.
Demand for benzene from the US remains in place, although
a narrow arbitrage between the two regions has raised concerns
about loading too many cargoes. South Korea in July exported
about 60,000t of benzene to the US, while total exports from
Asia-Pacific were close to 100,000t. The arbitrage looks open on
paper, with the spread at $76/t, based on comparison between
prompt-month prices in both regions.
Demand for benzene from China has failed to pick up on
persistently high inventories in the east of the country and slower
downstream market conditions. It is unlikely that demand from
the largest market in this region will pick up in this quarter as
stocks are still estimated at about 170,000t in east China. Domestic market prices were at about $695-701/t in the past week,
much below fob South Korea prices and underscoring the lack of
intra-regional arbitrage opportunities. Sinopec also maintained
its listed prices for the fourth consecutive week at 5,200 yuan/t
ex-refinery or $701/t.
Chinese benzene import demand may remain weak heading
in the fourth quarter, with the expected start of production at
Zhongjin Petrochemicals’ Zhejiang province-based 500,000 t/
yr benzene unit from the end of August or September. The plant
is currently having trial runs but there were no clear updates on
whether on-specification benzene production has been achieved.
The start of production at this unit is expected to reduce import
demand from some key consumers in east China.
South Korea, which is the biggest exporter to China, is estimated to have exported a meagre 18,000t of benzene in July.
This is a sharp drop from the 121,000t shipped in April this year.
China has imported 895,000t of benzene in the first six months
of the year, more than double the 331,000t imported during
January-June 2014. This sharp increase in imports has come on
the back of downstream expansions in the phenol and MDI sectors. But all the new plants and expansions in these two sectors
has also created bearish pressures on these two markets. MDI
prices have fallen in recent weeks and market conditions are
currently weak. An oversupply in China’s phenol supplies because
of capacity additions has pushed prices lower and forced a cut in
operating rates at several units.
Benzene production in South Korea and Japan remains high
on steady production at most crackers and reformers. Margins for
Copyright © 2015 Argus Media Ltd
Asia-Pacific prices
$/t
Timing
Low
High
Mid
±
Benzene
cfr South Korea contract
Aug
770.00
777.42
773.71
-44.64
cfr Taiwan contract
Aug
770.00
786.42
778.21
-44.64
cfr Asean contract
Aug
770.00
781.42
775.71
-44.64
fob South Korea
Sep
705.00
770.00
737.50
-29.50
fob South Korea
Oct
700.00
765.00
732.50
-22.50
723.05
-36.70
710.00
760.00
735.00
-25.00
fob South Korea
Marker
cfr China spot
Prompt
cfr China month avg
Jul
747.50
761.82
754.66
na
fob southeast Asia
Prompt
695.00
760.00
727.50
-29.50
ex-tank E China Yn/t
Prompt
5,050
5,300
5,175
-150.00
ex-tank E China
Prompt
681.42
715.15
698.29
-20.30
ex-works Sinopec Yn/t
Prompt
5,200
0.00
ex-works Sinopec
Prompt
701.66
-0.05
Styrene
cfr Taiwan contract
Jul
1,224.00
1,224.00
1,224.00
-108.80
cfr China
Aug
1,145.00
1,205.00
1,175.00
-30.00
cfr China
Sep
1,130.00
1,175.00
1,152.50
-32.50
cfr China
Marker
fob South Korea
Aug
1,125.00
1,185.00
fob South Korea
Sep
1,110.00
1,155.00
fob South Korea
Marker
1,164.50
-30.10
1,155.00
-30.00
1,132.50
-32.50
1,144.50
-30.60
ex-tank China Yn/t
Prompt
8,650
9,050
8,850
-350.00
ex-tank China
Prompt
1,167.18
1,221.16
1,194.17
-47.33
South Korea benzene premium to Japan naphtha
$/t
500
400
300
hhh
200
100
Japan cfr naphtha = 0
0
07 Aug 14
04 Dec 14
09 Apr 15
06 Aug 15
aromatics producers continue to be strong with the naphtha-BTX
spread at $225/t in the past week. Toluene disproportionation
(TDP) margins have improved in the recent weeks as toluene
prices have fallen in the region and the toluene-benzene spread
has strengthened to $88/t, about $12/t which is below the breakeven $100/t mark for covering the variable cost of production.
Page 7 of 9
Argus DeWitt Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Asia-pacific
Margins for selective TDP producers are positive and supported
by relatively steady and strong PX prices.
Southeast Asian benzene supplies are slightly less abundant
and more balanced compared with demand. The force majeure
on benzene and PX supplies by Thailand’s PTTGC last week, along
with the disruption at one of its aromatics units, is expected to
keep supplies better balanced during August and maybe even
September. PTTGC declared the force majeure on supplies from
its No.2 aromatics plant that can produce up to 655,000 t/yr of
paraxylene and 355,000 t/yr of benzene for an estimated 40-45
days following a disruption at an upstream feedstock unit. The
producer may bring forward its planned maintenance scheduled
for later this year, which in turn is expected to push the restart
of production. Discussions on a fob southeast Asia basis have
been at about a $8-10/t discount to fob South Korea prices in the
past week compared with the $15/t discount seen in the past few
months.
Phenol
Offers on a cfr southeast Asia basis were at about $1,050/t this
week amid a lack of buying interest. Phenol supplies in southeast
Asia are expected to rise heading into the last quarter of this
year, as PTT Phenol starts production at its new Mab Ta Phutbased 250,000 t/yr unit. The No.2 unit is due to start production
from the mid-November, doubling the producer’s capacity.
PTT is operating its No.1 plant, producing another 250,000
t/yr of phenol, at full rates at present with it unaffected by the
disruption at the upstream aromatics unit at the same complex.
The producer has secured sufficient stocks of cumene to tide it
by part of the affected period and will get benzene supplies from
the No.1 aromatics unit that is running normally.
Mitsui Phenols Singapore is considering a 10pc reduction in its
operating rates from October because of reduced demand from
a key derivatives producer that is planning a turnaround from
November. The Singapore-based plant can produce 310,000 t/yr
of phenol and 186,000 t/yr of acetone.
Styrene
The styrene monomer market extended losses during this latest
assessment week, as crude values hit a fresh five-month low
and demand from derivative markets remained weak. Volatile
stock markets also had a dampening psychological impact on the
styrene market. But the gradient of the price fall was gentle,
as the pace was slowed down by short covering on Wednesday
amid still tight supplies. A further reduction in supplies is likely as
Copyright © 2015 Argus Media Ltd
SM enters the fall turnaround season and imports from overseas
remain limited.
The lack of market conviction and soft buying interest
prompted sellers to reduce their offers amid falling prices.
August cfr China offers were lowered from above $1,200/t and
some deals were seen done at $1,175-1,185/t late on Wednesday
as trading firms sought to cover back their short positions after
prices fell. But sentiment continued to worsen and discussions
finished the week at $1,140-1,150/t.
Many trading firms also sought to unwind their short positions
in August cargoes by concluding the August-September intermonth spread deals at a backwardation of $33-35/t. This spread
fell back to $30/t at the end of the week and looks set to narrow
further as demand is expected to remain weak.
The lack of market confidence also prompted more interest in
concluding forward-month September cargoes on a floating basis.
These cargoes were traded based on September cfr China basis
at premiums of $9-15/t. Fixed price discussions finished the week
at $1,130-1,140/t cfr China.
Weak demand, together with a loss of market direction, caused
prices of SM to lose almost $100/t within two weeks. But production profits remain protected as feedstock prices fell faster. Cash
margins for standalone producers after accounting for operating
costs remain above $90/t this week. For integrated producers, the
production spread between naphtha and SM is about $608-700/t
and the benzene-SM production spread remains above $400/t. This
spreads will continue to support robust SM production.
Despite high operating rates, supplies in northeast Asia
remain tight. Although Japan’s Idemitsu Kosan raised operating
rates to full production at its two SM units located in Tokuyama,
which are able to produce 340,000 t/yr, the company is still unable to bring on line its 210,000 t/yr unit located in Chiba after
it was shut almost two weeks ago. Apart from strong demand
from its domestic derivative polystyrene (PS) sector, a weaker
Japanese yen has also made it more expensive for Japanese
industries to import PS. Japan continues to maintain high PS operating rates. Stocks of SM remain at historical lows, limiting the
country’s ability to export SM to key market South Korea.
Taiwanese producer Formosa will reduce its SM production
by half as its No.1 and No.2 SM units, with a total capacity of
600,000t/yr, are scheduled for 40 days of maintenance starting
in September. The company may need to buy up to 20,000t of
SM with September or October delivery to Taiwan from the spot
market as a result. But the company has little impetus to stock
up now because of falling prices, unstable crude and softening
Page 8 of 9
Argus DeWitt Benzene and Derivatives
Issue 15-32 Thursday 6 August 2015
Asia-pacific
derivative demand. Prices of Taiwan’s key derivative, acrylonitrile
butadiene styrene (ABS), continue to slide with soft demand and
production margins have turned negative. ABS producers remain
reluctant to raise operating rates after lowering production a few
weeks ago.
Tight supplies will continue to support prices. Market participants expect lower than normal overseas volumes for August arrivals. Availability from Japan and South Korea will continue to be
limited, and while stocks in east China coastal ports may slowly
build up because of high operating rates, it will take some time
before stocks can return to normal levels. Asahi, Formosa, GPPC
and TSMC all have shutdowns scheduled from the second half of
August until the end of the year. Supplies from southeast Asia
will still be suppressed as well, especially after SMI shuts both SM
lines with a total capacity of 350,000 t/yr for three months, in
line with a corresponding shutdown at its cracker. The shutdown
at its cracker has been postponed from the end of August to midSeptember but SMI has not confirmed any changes to its shutdown schedule for styrene.
Shandong Yuhuang has stopped production at its 200,000 t/yr
line because of a technical fault, while New Solar has decided on
a month-long turnaround at its 250,000 t/yr SM unit at the end of
August. This facility is currently operating at 70-80pc in preparation for the maintenance.
Stocks at coastal tanks in east China dipped by 3,300t to
32,600t this week. If consumers’ stocks are included, this figure
rises to 69,900t, which is below the July average volume of about
70,000-71,000t and is only 28pc of levels a year ago. China has
been unable to build stocks despite relatively high operating rates
as imports have been sliding. The recent dip in import might also
be attributable to the slight pick-up in downstream operating
rates across all three key derivatives, namely expandable polystyrene (EPS), PS and ABS.
Production of EPS, which constitutes about 40pc of SM
demand in China and is usually in its peak demand season in summer, picked up from 48pc a week ago to 52pc earlier this week.
EPS producers had to raise operating rates to fulfil orders because
of low stocks after they reduced operating rates to 40pc a month
ago because of production losses. These margins started improving since two weeks ago to cover production costs but there
is little to no profits. Although EPS prices fell by 350 yuan/t to
Yn9,800/t this week, production margins remained stable. Prices
of prompt SM cargoes fell from Yn9,000/t last Friday to trade at
Yn8,650/t towards the end of the assessment week. EPS producers typically require about Yn1,000/t to cover production costs.
Towards the end of the week, market participants said that EPS
producers slowed down production again after completing their
orders as demand had slowed once more.
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