The Asian styrene monomer market is set to lose around 223,000 mt of production in the first half of 2016, in line with H1 2015, but the impact is likely to be quite different, Platts calculations based on information from market and company sources showed Wednesday.
Volatile upstream crude, China’s weakening economy and a rise in deepsea supply mean the price hike sparked this year by the H1 loss is unlikely to recur next year, market players said.
In addition, the eight turnarounds scheduled in H1 2016 are at SM plants across Japan, South Korea, China, Taiwan and Southeast Asia; this year seven of the eight turnarounds in H1 were in South Korea, concentrating the impact on the benchmark FOB Korea marker.
“There may be some rebound [next year], but not the uptick in price seen this year, a trader in China said.
SM prices hit a year-to-date high of $1,454.50/mt FOB Korea May 15, up 54.24% from January 2, and posting the sharpest rise of all Asian aromatics markets in H1.
Asia is expected to lose around 222,900 mt of SM supply in H1 2016 as 1.92 million mt/year of its 19.6 million mt/year production capacity is shut for maintenance for varying periods over February-May, Platts calculations showed.
SM from South Korea, Japan and Taiwan accounted for 63.4% of China’s SM imports in 2014, Chinese customs data showed.
China is the main buyer of SM in Asia and the Middle East.
In the first half of this year, SM production loss due to turnarounds in Asia was 223,620 mt, according to Platts calculations, but seven of the eight SM plants shut over March-May were in South Korea, accounting for around 76% of the country’s total SM production capacity.
While market players expect the turnarounds will tighten supply of Asia-origin SM supply in H1 2016, any additional impact from the permanent shutdown of a Japanese SM plant in the period will be largely balanced by the startup of a new plant in China.
Asahi Kasei’s 320,000 mt/year SM plant in Mizushima is due to be scrapped in February-March 2016, Platts reported earlier.
However, a new SM plant is due to start up in China in March; Xinri Chemicals’ 300,000 mt/year SM plant in Changzhou, Jiangsu province, according to market sources.
The scrapping of one plant and the startup of the other will put the net loss of SM production capacity in Asia at 20,000 mt/year, or 10,000 mt in H1, taking the total loss of production in the first half to 232,900 mt.
The fall could prompt a rise in premiums for FOB Korea-based SM term contracts for 2016, which are currently under discussion and due for completion by year end, market sources said.
The premiums for 2015 were set at $7-9/mt to the FOB Korea marker.
Market participants at this stage anticipate offers for 2016 SM term premiums to be in the double digits to the FOB Korea marker, although most expected settlements in the $8-$9/mt range.
