The spread between styrene monomer and feedstock naphtha has shrunk to $453/mt, the lowest level since July 13 -- when it was at $451/mt -- due to falling SM prices and relatively stable naphtha, Platts data showed.
The spread has shrunk by $155.75/mt, or 25.6%, since its peak so far this year on August 5.
SM prices have fallen $64.50/mt, or 12.5%, since September 12, after SM prices in Europe and the US weakened and arbitrage windows opened into Asia.
SM was last assessed Wednesday at $1,407/mt FOB Korea and naphtha at $954/mt CFR Japan.
Asian markets responded negatively Thursday after the US Federal Open Market Committee's announcement on monetary policy pointed to weak economic growth late Wednesday, and crude prices softened. The bid for SM cargoes to load in November was at $1,370/mt versus offer at $1,380/mt, both FOB Korea basis, down from an assessment price of $1,396/mt FOB Korea Wednesday.
"There are no buyers in [China's] domestic market [today]. Demand is extremely poor for the upcoming season. Construction demand, export demand and automobile demand are all gone," a South Korean trader said Thursday.
Integrated producers of SM typically require a spread of around $400-450/mt to naphtha to produce with a profit, sources said, but this may vary between producers. Some producers claim the breakeven level is now closer to $500/mt due to firm energy prices, which have increased the general cost of production.
However, other producers typically look at the spread between SM and benzene and ethylene, and margins there still look quite good.
SM is made up of roughly 80% benzene and 30% ethylene. Producers typically require a spread of $250/mt or more between SM and benzene, and the spread was at $333/mt Wednesday. The spread to ethylene was at $304/mt the same day. Adding a conversion cost of $150/mt, that gives a rough breakeven price for SM at $1,318.30/mt, and a profit of $88.70/mt.
