Asian import PS, ABS markets pull back after 3-month uptrend

In China and Southeast Asia, import PS and ABS markets have turned bearish following an upward trend that was in place since July. The combination of falling production costs and lingering tepid demand has resulted in the recent reversal while signaling further downside in the interim.

Import prices down from multi-month highs

During the week ending on October 6, import PS and ABS prices in China and Southeast Asia witnessed decreases ranging from $5/ton to $50/ton compared to the previous week.

After last week’s downward adjustments, the import PS prices on a CIF China/SEA basis retreated from their highest levels since January-February, the weekly average data from ChemOrbis Price Index showed. The average import ABS prices in both markets also slipped from their nearly one-year highs.

Double-whammy of lower costs and weak demand

Cost erosion came to the fore

The second half of September kicked off concurrently with the slump in styrene prices. After plunging by 10% within two previous weeks, last week’s spot styrene prices mostly stabilized at $1160/ton CFR China and $1150/ton FOB Korea, according to ChemOrbis Price Wizard.

Although firm product costs had mainly propelled styrenic markets during the previous uptrend, most producers yielded to the ongoing decline in styrene monomer. The first price cuts came out following relentless hikes, with a producer’s source saying, “We cut our offers as styrene is moving in a downward direction.”
Meanwhile, crude oil prices experienced a free fall last week due to rising worries about fuel demand and hit their four-week lows of under the $85/bbl mark. This event contributed to the erosion of cost support and dampened market sentiment. A trader expressed his worries, “Crude oil has tumbled just within the week, so we are worried the prices will drop further.”

Buyers kept looking away

The lack of demand kept exerting pressure on the sellers’ side as buyers either made limited purchases when necessary or stayed in a wait-and-see stance in anticipation of additional drops. The weakness in downstream demand could be attributed to underperforming end businesses and economic uncertainties around the globe.

In addition, the absence of Chinese players on the back of the National Day holiday also aided in muted markets. A source at a Taiwanese producer said, “Market transactions are few and far between as Chinese players are on the extended holidays.” Most eyes have been on the demand from the country in the post-holiday period.

What lies ahead?

The trajectory of upstream values will be pivotal in setting the tone of the Asian styrenic markets. As for the near term, weakness is expected to reign over the regional PS and ABS markets, with falling feedstock costs and weak underlying demand weighing on players’ confidence.

The pace of the potential downswing, however, is likely manageable. Suppliers have reportedly sold at losses as the production costs remained firm when considered over the long term. Besides, there is a slight improvement in year-end demand, especially for ABS, in Southeast Asia. “We purchase some cargo to secure the minimum inventory. Demand for the year-end period has marginally increased,” said a Vietnamese converter.