Arbitrage shipments of styrene monomer from the US and Europe are set to arrive in China in late May and June, likely widening the backwardation between the two months in the Asian SM market, trade sources said Thursday.
Around 30,000-50,000 mt of SM from the US and 10,000-15,000 mt from Europe is estimated to be en route to Asia, trade sources said.
"The first half of May is still tight [on supply] but June is very bad because there is more supply coming," a Chinese trader said Thursday. The expected arbitrage cargoes will arrive just as Asian SM production returns to normal after turnaround season, widening the price gap between the two months.
In the East China domestic market, the prompt price of SM cargoes was hovering around Yuan 12,400/mt Thursday morning, or about $1,667/mt on an import parity basis, down about Yuan 75 from the day before. June clips were offered at Yuan 11,800/mt, roughly $1,586/mt on an import parity basis.
On a CFR China basis, buying interest was around $1,650/mt versus offers at $1,660/mt for Asian cargoes excluding Middle East and Taiwan origin.
The second half May laycan was pegged at $1,646/mt CFR China, down $5/mt from Wednesday's assessed price of $1,651/mt, while H1 June was pegged at $1,619/mt CFR China, down $12/mt from Wednesday's assessment, with the talking range for June loading cargoes at $1,610-1,620/mt CFR China.
Traders said the arbitrage window from the US was currently shut, but 30,000-50,000 mt was likely to have been booked when it was recently open for loading in coming weeks for shipment to Northeast Asia.
The arbitrage from Europe to Asia also opened recently, with talk of up to 15,000 mt being shipped east, although bookings were so far said to have been made only into India. European cargoes loaded in April would likely arrive in India in late May, a trader said, adding that offers of European origin cargoes were still being made to buyers in China.
SM was assessed at $1,590.20/mt FOB US Gulf Wednesday, $50.80/mt below CFR China at $1,641/mt. The gap between CFR China and Europe was $101/mt, with FOB ARA assessed at $1,540/mt.
Freight for 5,000 mt of SM from the US Gulf to China is around $80/mt, while the freight from Rotterdam to China is almost $100/mt, according to shipping sources. Freight from Rotterdam to Mumbai is close to $80/mt.
June SM prices in Asia are also under pressure from increasing supply as all major turnarounds in the Middle East and South Korea are expected to have ended by then, returning supply to normal levels after several months of restricted supply.
