Europe’s firmer styrene monomer market is drawing US arbitrage cargoes away from Asia, where regional supply is tightening as a result, a number of sources said Tuesday.
The FOB Amsterdam-Rotterdam-Antwerp SM marker flipped to a $11/mt premium to FOB Korea SM on Monday, from a $29.50/mt discount Friday, according to Platts data.
Northwest European SM barges loading 5-30 days forward were assessed at $1,440.50/mt FOB ARA Monday, up $15.50 from Friday.
The FOB Korea SM marker was assessed at $1,429.50/mt Monday, down $25/mt from Friday as the laycans rolled over in a steeply backwardated forward curve structure.
The US-Asia SM arbitrage window remains open on paper, but traders said few deals are being done for May loading and later.
A Seoul-based source said sellers of US-origin SM cargoes were drawn to the European market because of the firmer prices, shorter delivery times and lower freight costs than to Asia.
Before the strength in Europe, Asian market sources had expected at least 50,000 mt/month of US-origin SM to arrive in late June and July.
They would have loaded in March to early May.
US-ASIA ARBITRAGE REMAINS OPEN
The US FOB Gulf Coast/FOB Korea SM arbitrage window has been open on paper since April 13, according to Platts data.
The spread was assessed at $81.49/mt that day, above estimated $53.50/mt in freight costs from the US to South Korea for 5,000-12,000 mt of aromatics.
The US FOB GC/FOB Korea SM spread stood at $74.04/mt Monday, still above freight costs.
The US-Asia SM arbitrage window was shut for most of early 2015, when similar factors in Europe — turnarounds and tight supply — were luring US cargoes.
In the first quarter, US shipments of SM to South Korea and China were down 57% year on year to 58,276 mt, according to combined customs data from South Korea and China.
US-origin SM accounted for around 5% of China’s imports last year and 18% of South Korea’s imports.
The Northwest Europe SM market is expected remain strong in the coming weeks due to tight supply from ongoing turnarounds.
An estimated 10% of Europe’s 6.665 million mt/year capacity is expected to be offline in June, taking up to 55,000 mt of material out of the European supply chain.
– Platts.com
