Premature rebound in Asian styrene monomer cost caused by long supply

TheAsian styrene monomer (SM) market is one of the many markets that positively reacted to the news about progressive trade talks between China and the USA and the surge in energy complex earlier this week. This has got players in the styrenic market really excited, but the fire is not long lasting apparently. 

Three consecutive days of climbing since the beginning of the week add $65/ton to SM prices based on FOB South Korea from last Friday. Market loses momentum on Thursday, shredding $15/ton from the gains and send prices to below the $1000/ton threshold again.

Softer demand in China is one of the factors causing the reduction. However, sources blamed the rising inventories levels in Eastern China market to be the main culprit here. 

According to market players, SM inventories in Eastern China rose 14,800 tons from last week to approximately 151,000 tons this week. Meanwhile, the import arrival reached 60,000 tons, outstripped consumption of 45,200 tons. 

“We are not optimistic about the near-term market outlook since the recent hike was mainly driven by the energy prices. Downstream demand is not strong at the moment,” a trader said. In fact, downstream ABS plants are reducing operating rates due to negative profit margins, limiting the need for SM in Asia. 

Players are monitoring two major events namely the progress of resolving the trade war between China and the USA and the OPEC+ decision in cutting oil output. Any positive outcome might boost the sentiment again.