With the arbitrage window to send styrene monomer from Europe to Asia widening on paper, traders are cautiously looking into the possibility of getting cargoes into Asia, market sources said this week.
The arbitrage has been open on paper since September 6, when Platts assessed the SM FOB Rotterdam price at $1,410/mt and CFR China price at $1,481/mt. It has since widened. On Monday, the FOB Rotterdam price was assessed at $1,372.50/mt and CFR China at $1,500/mt, and taking freight of around $70/mt for a 5,000-mt cargo, traders would stand to make a profit of around $57.50/mt, Platts data showed.
"Theoretically, [a price gap of] around $85-90/mt should open the arbitrage from Europe to main ports of China," an Asian SM trader said Tuesday.
But the window may not remain open long enough for traders to make the most of it, with Asian SM currently in a steep backwardation of $22/mt for the second-half September/H2 October spread and European prices firmly in contango of $10/mt for September/October.
It takes about one month to ship cargoes from Europe to China.
A Chinese trader said that he was checking the possibility of getting cargoes from the West, but was cautious as he did not think the window would stay open for very long.
European prices are expected to go up mainly on the back of turnarounds, said one trader. "It is better to be long in the EU, and wait and watch instead of shipping it out to China with chances of getting caught on the wrong foot pretty bright."
Asian prices, on the other hand, were currently supported by a number of turnarounds and closures.
Shanghai Secco's 650,000 mt/year plant was unexpectedly shut following a fire at a tank farm last Thursday.
Meanwhile, Asahi Kasei's and Nihon Oxirane's plants in Japan are undergoing turnovers over September.
There have also been production problems at Shell-BASF's joint venture Ellba in Singapore, and Taiwan's Formosa Chemical & Fibre Corp.'s No. 1 and No. 2 plants have been shut since May due to a pipeline fire.
"You cannot have it arrive before November, so that is a big issue. With Formosa [expected to] restart in the first week of October and [Shell's] Seraya and Ellba up and running, plus the Japanese restarting as well, it will be difficult [to make the arbitrage work]," the trader added.
