The spread between styrene monomer and feedstock ethylene narrowed to $14.50/mt Tuesday, its narrowest in more than three years, on softening SM prices and stable ethylene, Platts data showed.
The Asian SM-ethylene spread was last thinner April 5, 2011, when the two products were at parity.
SM slumped $5/mt from Monday to be assessed at $1,554.50/mt FOB Korea and $1,580.5/mt CFR China Tuesday. Ethylene was assessed at $1,540/mt CFR Northeast Asia Tuesday, unchanged from Monday.
SM prices have come under pressure recently due to weaker-than-expected seasonal demand for expandable polystyrene combined with high SM inventories in key market China.
Benzene, the main SM feedstock, has also weakened, adding further downward pressure on SM.
Ethylene represents roughly 29% of SM feedstock, with benzene making up the rest.
Several non-integrated SM producers in Asia have either cut operating rates or considered reductions because of negative or narrow production margins.
For example, South Korea's SK Global Chemical in late July chose to idle its recently restarted 350,000 mt/year SM plant at Ulsan for the entire month of August due to poor margins and sluggish demand.
SM production margins were negative by $81/mt Tuesday, based on the latest feedstock prices and a conversion cost estimated at about $150/mt.
However, integrated producers of SM, who base their cost on the price of naphtha, have healthy margins and are therefore unlikely to lower their run rates.
The SM-naphtha spread was $666/mt Tuesday, as naphtha inched up $3.40/mt day on day to $888.50/mt CFR Japan.
Integrated producers typically target a spread of more than $550-600/mt between SM and naphtha for profitable production.
