The backwardation between August and September in the Asian styrene monomer market has widened significantly this week, as interest for September cargoes slowed, amid a bearish outlook on styrene in the third quarter, according to market sources.
Following an unplanned outage at South Korean producer Hanwha Total Petrochemical's naphtha-fed steam cracker and downstream 400,000 mt/year No. 1 SM plant at Daesan at around mid-day Monday, active buying interest for August cargoes emerged amid concerns of tightening prompt availability.
The CFR China SM marker was assessed at a week-to-date high of $1,197/mt on Monday, up $11/mt day on day, on the back of separate deals concluded for prompt August-loading cargoes at $1,200/mt and $1,210/mt CFR China.
However, the market sentiment quickly turned bearish following news that Hanwha Total's steam cracker was successfully restarted on Tuesday evening with no severe impact on downstream SM production, coupled with the news of Kuwait's Equate Petrochemical Co. successfully restarting its ethane cracker and 450,000 mt/year styrene plant at Shuaiba on Tuesday, following an unplanned outage on July 8.
Amid a sharp fall in domestic Chinese SM prices of Yuan 100/mt on Wednesday, participants chose to stay on the sidelines to observe the market on concerns that Q3 could be oversupplied.
News of 35,000-40,000 mt of US-origin deepsea cargo loaded in May and due to arrive in China between end-July and early-August, as well as the impending shutdown of several SM downstream plants in China's eastern Shandong province for one month from mid-July, due to environmental compliance violations, compounded sentiments that August and September supplies could be more than expected.
Actively selling interests for September from regional traders emerged late-Tuesday, which continued to fall lower on Wednesday and Thursday, but buyers were not keen to discuss September cargoes, promptly opening up a $25/mt August-September backwardation on Thursday, up $8/mt from $15/mt last Friday.
"There has been a sudden pickup in swap discussions in the domestic Chinese market from Wednesday afternoon, with active selling interest for September from Chinese traders, which has added to the general bearish sentiment in the CFR China discussions for September, said a source.
The backwardation between the two months remained at $25/mt Friday morning. However, as interest for September remains lukewarm, industry participants expect the backwardation to widen further in the next few days.
S&P Global Platts assessed Asian SM at $1,176.50/mt CFR China and $1,153.50/mt FOB Korea on Thursday.
