South Korea's largest styrene monomer (SM) producer Hanwha Total is planning to further reduce operating rates.
The producer, which has a total capacity of 1.1mn t/yr of SM, had already dropped operating rates by 10pc in October after enduring production losses. Hanwha Total is now planning to cut SM operating rates by another 10pc in January next year to 80pc.
Integrated producers generally need the naphtha-SM production spread to be at least $500/t to cover production costs. This spread averaged $440/t in October and fell further to average $337/t in November, according to Argus' calculations. The current naphtha-SM production spread in December has averaged $328/t so far.
Hanwha Total plans to sell less SM to the South Korea domestic market and has increased sale prices for next year's term contracts by $5-7/t. This year's price was generally fixed at a discount of about $43/t to cfr China prices. The discount for 2020 term contracts will be at about $36-38/t to cfr China prices.
It is unclear if the additional benzene from the drop in SM production may eventually be sold to the spot market as Hanwha Total's benzene inventories are low. The producer has been operating its selective toluene disproportionation unit at 94pc since November and has a turnaround at its reformer planned for next year's second quarter.
By Kate Lee
