The spread between European styrene monomer and Asian SM widened to an all-time high of $323.50/mt Tuesday as the European price soared $111/mt from Monday to $1,800/mt FOB ARA, while Asian SM rose $6/mt to $1,476.50/mt FOB Korea, Platts data showed.
This is the first time the spread has crossed $300/mt, based on Platts data, which goes back to 2004.
Overnight in Europe, the price were assessed at $1,800/mt FOB ARA, just $31/mt shy of the all-time high of $1,831/mt FOB ARA on July 23, 2008. The day's sharp increase was attributed to record high benzene prices, and short-covering activities in a market plagued by acute tightness.
Also, the prompt Asian market is tight on supply, but it has nonetheless not soared to such heights as in Europe, and was assessed at $1,476.50/mt FOB Korea on September 11.
Based on the wide price gap between the two regions, the arbitrage window from Asia to Europe is wide open on paper. Shipping costs are only around $110/mt for 5,000 mt from South Korea to the Netherlands.
But although several trading companies have made attempts at shipping cargoes from the Far East to Europe, so far only about 10,000-12,000 mt has been shipped for arrival in October, Asian market sources said this week.
Sources also said it was not easy to finalize more fixtures as both ship space and prompt-loading SM cargoes remained scarce.
"The problem is how to make shipment time. They [traders] cannot arrange shipments within September, so I guess early October might be the earliest, and that means November-arrival [cargoes]," a South Korean trader said Tuesday, adding that November-arrival cargoes could be risky.
Another trader said European buyers preferred to buy US-origin cargoes because of a shorter lead time.
"September- and October-arrival [cargoes] in Europe look OK, but to fix Asian cargoes now means only-October loading [cargoes] are available and that means November-arrival [cargoes]," he said.
