The price spread between styrene monomer and its main feedstock benzene has narrowed to its lowest level since late January as benzene finds support from arbitrage openings to the US and Europe, while SM struggles with poor downstream demand, Platts data shows.
With SM falling $4/mt to $1,311/mt FOB Korea last Friday and benzene rising $11/mt to 1,093/mt FOB Korea from Thursday, the spread narrowed to $218/mt on May 25, the lowest since January 25 when it was $216/mt.
SM producers typically target a spread of about $240-250/mt over benzene to keep margins healthy, but this also depends on the ethylene price, as SM production uses roughly 80% benzene and 30% ethylene.
Based on the most recent prices of benzene, and ethylene at $1,015/mt CFR Northeast Asia, and $150/mt production cost, SM was a marginal $3.20/mt above breakeven on Friday. The margin remains positive due to an unusually wide spread between SM and ethylene, $296/mt, the widest since September 21 last year when it was $304/mt.
Benzene prices have been firmer due to arbitrage opportunities from Asia to the West.
European benzene for June arrival closed Friday at $1,327.50/mt CIF ARA. With freight estimated at $85/mt, Asian cargoes could arrive in Europe at $1,178/mt CIF, netting traders $149.50/mt if they take advantage of the arbitrage.
A South Korean trader was said to have shipped out around 15,000 mt of cargoes to Europe last week. The last time South Korea exported benzene to Europe was in April 2011.
As for the US, June benzene was assessed at 416 cents/gallon FOB US Gulf last Friday ($1,184.87/mt). With freight estimated at $60/mt, Asian cargoes could arrive at $1,153/mt, giving traders a profit of $32/mt.
