The profit margin for Asia styrene monomer producers has turned negative for the first time in seven months on higher feedstock prices and sluggish demand, Platts data shows.
The profit margin -- or spread above an estimated breakeven price -- has fallen from $78.3/mt on November 21 to a negative spread of $1.35/mt on December 21, based on prices of feedstocks benzene and ethylene and a production cost of $150/mt, the data showed.
SM is made of roughly 70% benzene and 30% ethylene, although the content can vary slightly, according to industry sources.
Benzene and ethylene prices have risen much faster than SM prices in recent months. SM demand, on the other hand, has slowed down following the start of winter mainly due to lower demand for expandable polystyrene in the construction industry in China and the northern hemisphere. SM is the feedstock to make EPS.
As of Wednesday, the SM-benzene spread reached its narrowest point since late May at $258/mt, as SM settled at $1,324/mt FOB Korea and benzene at $1,066/mt FOB Korea. One month earlier, on November 21, the spread was $324.50/mt.
The spread to ethylene was $175/mt Wednesday with ethylene at $1,149/mt CFR Northeast Asia. The spread was down 32% from $257/mt a month earlier. Looking at the price of naphtha, which matters most for integrated producers, it was $909.25/mt CFR Japan Wednesday, giving a spread of $414.75/mt against SM. The spread was $429.4/mt one month ago.
