Traders look at Asia-ARA styrene arbitrage as China market weakens
By：admin Updated：2015-03-16 17:41:24
A fall in Chinese styrene monomer prices over the past few days has opened the arbitrage from Asia to Europe, sources said Tuesday.
One trader source said he was looking at sending 10,000 mt of Korean styrene to the Amsterdam-Rotterdam-Antwerp region for early May arrival， rather than to China.
Chinese styrene prices were assessed at $1,089.50/mt CFR China Tuesday, down $33/mt day on day. Week on week, prices were down $71.50/mt, or 6%, on the back of active selling and weak upstream markets.
Korean spot material loading in the first half of April fell $33/mt to be assessed at $1,073/mt FOB Korea.
Meanwhile, European styrene prices have remained strong as a combination of turnarounds, short covering, and bullish demand from downstream derivatives have kept prices high this month, sources said.
NWE April prices were assessed at $1,357/mt FOB ARA Monday, with a daily backwardation of $1.59/mt, May prices stand at $1,308/mt.
Freight between the regions is $100/mt for 5,000 mt parcels.
However, some market participants said it was unlikely any material would actually make it to Europe given tightness in Asia, which is scheduled for a heavy turnaround season with approximately 76% of South Korea’s total SM production capacity shut for maintaining over March-May.
The estimated loss of production in Asia during March and April is around 202,100 mt and around 190,800 mt in May.
Another European source said the downturn in Asia was temporary rather than a change in supply fundamentals and also highlighted the 4-6 weeks shipping time from Asia.
“The problem with the Asian-Europe arbitrage is one of timing. It takes a long time to get here and in that month and a half the whole styrene environment could change. So, it is very risky,” the source said.
With Europe being the highest priced region, the source said a more likely outcome was Middle Eastern material being diverted to Northwest Europe rather than Asia.
NWE styrene barges loading 5-30 days forward were assessed at $1,377.50/mt FOB ARA Monday, while US prices stand at 55.35 cents/gallon ($1,218/mt) FOB USG.