The spread between styrene monomer prices and petrochemical feedstock naphtha in Asia widened to $593/mt on Monday, the widest it has been in more than a year, due to tight SM supply and firm prices, Platts data showed.
SM was assessed unchanged day on day Monday at $1,558/mt FOB Korea, while naphtha shed $10.88/mt over the same time period to $965/mt CFR Japan.
The last time the spread between SM and naphtha was around this level was August 8, 2011, at $595.30/mt, with SM at $1,503/mt FOB Korea and naphtha at $907.80/mt CFR Japan.
Asian SM prices are also currently hovering at around more than a one-year high due to tight supply brought about by a shortage of feedstock benzene in China and Northeast Asia following steam cracker turnarounds, combined with turnarounds at SM producers and peak season demand for expandable polystyrene over August-October.
SM prices rose to $1,558/mt FOB Korea on October 12, the highest since August 1, 2011, at $1,559.50/mt FOB Korea.
The supply crunch pushed domestic Chinese SM prices to four-year highs recently, with bids heard as high as Yuan 13,450-13,500/mt, or $1,796-1,803/mt on an import parity basis, Tuesday morning.
Further, the inventory level of SM in the east of China was last week reported at 37,400 mt, barely up by 1,500 mt from a three-year low of 35,900 mt the week before.
Looking forward, the crunch might not ease so soon though, as there are still more turnarounds to come in China, Malaysia and Taiwan toward the end of the year, market sources said.
Taiwan Styrene Monomer Company plans to shut its 140,000 mt/year No. 2 SM plant for maintenance on October 20 for three to four weeks until mid-November, while Taiwan's Grand Pacific Petrochemical Corp. plans to shut its largest SM plant at Tashe -- the 240,000 mt/year No. 3 unit -- for one month of maintenance in December.
In China, Jiangsu Leasty Chemical plans to shut its 400,000 mt/year SM plant for 15 days of maintenance from November 1, while Changzhou New Solar Chemical shut its 250,000 mt/year SM plant at Changzhou, Jiangsu province, on October 8 for about one month of scheduled maintenance.
Meanwhile, in Malaysia, Idemitsu SM (Malaysia), a unit of Japan's Idemitsu Kosan, plans to shut its 240,000 mt/year plant in Pasir Gudang, Malaysia, for a turnaround from late November to early January.
But these turnarounds are all scheduled and most market participants have likely made preparations well ahead, the sources said.
As for unexpected events, Ellba Eastern, a joint venture between Shell and BASF, declared a force majeure on supply from its 550,000 mt/year SM/propylene oxide plant in Singapore October 7, and the force majeure has not yet been lifted.
One potential cooling factor, however, is that prices in the US and in Europe are falling. The European price was $1,583.50/mt FOB ARA Monday, down 14% from a year-to-date high of $1,804/mt FOB ARA September 17, while the US price was $1,560.40/mt Monday, down 3% from a a year-to-date high of $1,609/mt FOB US Gulf September 25.
An Asian trader said these factors should "theoretically" have a cooling effect on the Asian market "but the current physical tightness in China is making this market totally nutty."
Another trader said many Chinese traders and end-users were still looking for prompt cargoes.
