The spread between European styrene monomer prices and Asian SM prices widened to a four-year high of $236/mt Tuesday, opening arbitrage possibilities, said traders Wednesday.
The FOB Amsterdam-Rotterdam-Antwerp SM price was assessed up $15/mt at $1,665/mt at London close Tuesday, while FOB Korea SM was up $5/mt at $1,455/mt, Platts data showed.
The last time the spread was any wider was on August 4, 2008, at $250/mt, when prices hit $1,772.50/mt FOB ARA and $1,522.50/mt FOB Korea.
The Asian SM market, however, remains firm at the moment amid tight supply in China, but prices are still far below Europe as Asian downstream demand is uncertain.
In Europe, while September is seen as firm currently amid good derivative demand, further out October has also picked up being assessed up $40/mt day on day to $1,550/mt FOB ARA Tuesday, and narrowing the steep September/October backwardation from $140/mt last week to $115/mt this week. The firm forward markets in Europe makes arbitrage shipments more attractive for Asian sellers, said traders.
The arbitrage from Asia to Europe is wide open at the moment, with the freight cost to send a 5,000-mt cargo from Ulsan to Rotterdam at about $84/mt.
But shipping over such a long distance -- the voyage takes about one month -- still involves some risk, especially since the European market is in such a steep backwardation.
Nonetheless, market sources confirmed that traders were trying to ship SM from the Far East -- mostly from South Korea -- to Europe, but not much had been fixed yet due to tight vessel space.
"[Earlier] the European market was [steeply] backwardated [for the] September/October [spread], but now it seems that the US keeps lowering its spot shipment volumes to Europe, which [is keeping] the European market tight and the backwardation has eased," one trader said Tuesday.
Reduced spot shipments from the US were caused by recent plant closures in the face of storms and planned maintenance.
The Westlake Chemical was still undergoing a turnaround at its 570 million lb/year (259,000 mt/year) Lake Charles, Louisiana, facility this week. It began a turnaround at the start of August and will remain shut into September. Other SM producers in the US have meanwhile shut their plants this week due to Hurricane Isaac.
