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Asia ABS market closes 2021 on weak footing

by Manolya Tufan - mtufan@chemorbis.com
  • 27/12/2021 (02:38)
Asian ABS markets have mostly been on a downward trend since around mid-September if occasional upticks are disregarded. A confluence of bearish factors including rising supplies, the off-season and lower spot styrene prices kept the momentum tilted to the downside during the fourth quarter of 2021.

Import ABS hits slightly above a-year low

According to the weekly average data on ChemOrbis Price Index, overall import ABS ranges in China and Southeast Asia hit their lowest levels since early November 2020. Cumulative drops reached around $300-320/ton since mid-September.

CIF – SEA – China – ABS

Local ABS in China stand at a year-to-date low

Meanwhile, the weekly average of local ABS prices are currently standing at a year-to-date low after posting a cumulative drop of $380/ton since mid-September. Sales pressure built up as supplies are ample in China, with plants restarting after maintenance turnarounds.

ABS deprived of support from the upstream side

Upstream costs failed to provide support to the ABS market. Spot butadiene prices on CFR China basis were down by $110/ton on the week to $630/ton, the lowest since late August 2020. Prices stand $930/ton below their early August peak, ChemOrbis Price Wizard showed.

Spot ACN prices on CFR China basis posted relatively smaller drops to move slightly below $2150/ton.

Styrene signals stabilization, the forward curve is still backwardated

When it comes to styrene, spot prices fell sharply during November as supplies lengthened amid start-ups in China.

Meanwhile, firmer crude oil futures pulled styrene out of the trough about a month ago. Data from ChemOrbis Price Wizard showed that spot styrene prices barely changed last week.

Although prices signaled a stabilization amid firmer oil futures and short coverings, the onslaught of new capacity additions in China keeps forward pricing outlooks looking bearish.

Approximately 58% of styrene, 25% of acrylonitrile and 18% butadiene are used in the production of ABS, as a side note.

Unsatisfactory downstream demand amid the off-season

Waning demand for home appliances amid the off-season has been the key pressure point. Downstream manufacturing in China stagnated further as many factories had to run at lower rates amid the country’s ongoing power supply crisis. In Southeast Asia, meanwhile, demand was hit by Covid lockdowns.

The year-end lull and demand worries amid the Omicron variant also weighed on buying sentiment and kept trading cautious in December.

Market activity lags behind expectations in the run up to Chinese New Year

Despite seasonal patterns, pre-holiday purchasing activity did not show an uptick this year amid reports of reduced orders. Indeed, market players contemplate leaving their desks earlier than usual for the Chinese New Year holiday that falls on February 1st, 2022.

Lower rates and waning demand counterbalance each other

The government’s plans to reduce air pollution ahead of the Winter Olympic Games that will be held in Beijing lead to reduced operating rates. Some sources expect lower production to be counterbalanced by waning downstream activities in the run-up to Chinese New Year holiday.

Last but not least, a recent lockdown in the northern city of Xi’an keep regional players on their toes, considering strict measures being issued due to China’s zero-case obsession.
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