The spread between styrene monomer and petrochemical feedstock naphtha narrowed to $370/mt Monday, the smallest spread since late April 2011, Platts data showed.
Poor demand for SM in China amid relatively high inventory levels within the country has pushed SM prices down in recent weeks, while continuously high energy prices are keeping naphtha firm.
"I think the trend will continue, most chemicals are weak compared with Brent and naphtha," a Chinese trader said, adding that naphtha is "cost driven, and [SM] demand will lag."
The price of SM was assessed up $2/mt day on day Monday to $1,445/mt FOB Korea, while naphtha rose $11/mt over the same period to $1,075/mt CFR Japan. The SM-naphtha spread has been on a falling trend after hitting $445/mt March 6.
SM has fallen 4.5% after hitting a year-to-date high of $1,512.50/mt FOB Korea March 2.
Integrated producers of SM seek to keep the spread with naphtha at around $450-500/mt, or preferably even wider, as they say the general cost of production has increased with relatively high energy prices.
"Downstream [demand for SM] still does not look that great and frankly I have my own doubts about the exuberance seen in the first quarter [in stock markets and commodities prices] carrying forward to the second quarter," another trader said.
The inventory level of SM in the east of China was heard at 125,000 mt last week, while market sources estimates a "normal" inventory level to be around 70,000 mt. There had been reports of end-users in China selling their feedstock SM cargoes back into the market because of poor demand and margins for their end-products.
SM is used to make acrylonitrile-butadiene-styrene, polystyrene and expandable polystyrene -- polymers used in many kinds of consumer products.
