China’s ABS market on soft path dragged by subdued demand
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Buying sentiment hit by COVID-19 outbreak
Activity has been broadly hampered in China. This is due to an ongoing quarantine required by the Chinese government as part of the efforts to control the spread of the new coronavirus, which has caused more than 1,300 deaths with over 60,000 confirmed cases around the world so far.
Many downstream ABS consumers have been unable to return to work in China which cause prolonged shutdowns or partial resumption of factories.
Market lacks support from upstream costs
Not only depressed activity in China and partially Southeast Asia but also falling styrene prices weighed on the ABS market . Spot butadiene and ACN prices in Asia also posted some losses, reinforcing the cautiousness among players.
Spot styrene dipped nearly 14% in a month
According to ChemOrbis data, spot styrene prices have dived nearly 14% for the past four weeks on an FOB Korea basis. This was in line with visible losses in oil prices which hovered around their lowest levels since December 2018 on the NYMEX (WTI) this week, according to the weekly average data from ChemOrbis.
“We prefer to be on the sidelines for now as the outlook calls for additional discounts based on lower production costs. Plus, our end product orders are not promising at the moment,” a converter in China noted.
Lower operating rates may cushion larger drops for ABS
In response to subdued demand, several Asian ABS producers have lowered or mulling over reducing their operating rates.
An ABS producer affirmed, “We are barely receiving any orders nowadays even after cutting our offers slightly for March shipment cargos. Many producers have reduced their operating rates. This may mitigate the impact of virus-hit trade and unsupportive costs to some extent and keep the size of price drops limited in the coming days.”
Virus outbreak hits China’s auto industry
ABS is widely used in auto parts, electronic housings, pipe fittings, lego toys and white goods. China’s auto industry has been among the industries that were affected by the disease most with supply chain also facing disruptions.
Many auto plants in China have been shut for weeks now in the scope of the government’s efforts to contain the virus.
According to China’s Association of Automobile Manufacturers , less than 2 million cars were sold in January, an 18% plunge year-on-year. The association has concerns that the impact of COVID-19 on the industry may be worse than 2003’s SARS epidemic.
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