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Supply constraints send key ABS markets to new highs

by Merve Madakbaşı -
  • 13/11/2020 (08:41)
Global ABS markets witnessed a bullish run during H1 November on the back of persistently tight volumes. Soaring feedstock costs and improved demand from home appliances and auto industries gave an upper hand to sellers in their quest of hikes.

· Tightness prompted juicy margins for ABS producers
· Immediate supply relief is seen unlikely
· Huge price hikes keep buyers on the edge

Feedstocks lend support to sellers’ hikes

Styrene prices have climbed across the board since early October while the rising trend gained speed towards mid-November in response to tighter global supply and bullish oil markets.

An unexpected production hiccup at South Korea’s LG Chem has reinforced limitations. According to ChemOrbis Price Wizard, spot styrene prices have surged nearly $130/ton to near $1100/ton both on an FOB South Korea and CFR China basis when compared to early November. The latest figures also pointed to a two-year high.

Likewise, spot styrene prices on an FOB NWE basis climbed to a 9-month high of around $890/ton, which indicated a $45/ton gain (5%) in two weeks.

Korean ABS tested new highs in China

China’s import market has preserved its increasing path this month except for a short period of steadiness in early November. The surging styrene and butadiene prices in Asia encouraged suppliers to seek refreshed hikes, leading to ABS natural prices as high as $2300/ton CFR China on the high end of the market this week.

A trader opined, “Limited supply led to a new series of ABS hikes this month. Plus, healthier demand for electrical appliances and automobiles provided an extra support for the market.” Yet, some players reported that demand from Chinese players cooled off in response to the recent gains this week.

The ongoing tightness sent producer margins to the highest level since ChemOrbis started to compile data for Far East Asian offers to China in 2008.

Spot offers moved above €1600/ton on the high end in Europe

Europe’s ABS market has been pushed further up albeit at a faster speed in November with sellers initially seeking 3-digit hikes month-over-month. Spot ABS offers neared or even moved above the €1600/ton FD threshold on the high end in Italy’s local market.

According to the weekly average data from ChemOrbis Index, spot prices hovered at an 18-month high both in Italy and Northwest Europe this week. Plus, sellers have been enjoying quite good margins amid reduced availability, as can be seen from the graph below.

Players blamed a lack of import cargos for noteworthy hikes and said: “Lower shipping costs caused Far East Asian ABS makers to divert their cargos to China which cut import volumes into Europe. A reduced number of vessels added to the situation.”

Although a West European styrenics producer resumed operations last month, their ABS deliveries were yet to be back to normal amid backlogs, affirmed participants.

Demand from the auto industry has been gradually recovering in the recent weeks. Plus, manufacturers are reportedly enjoying a good number of orders for home appliances nowadays. At the same time, it remains to be seen whether or not the renewed restrictions related to the 2nd wave of pandemic will weigh on business on the longer run.

Turkey faced reduced export volumes from Far East Asia, Europe

Import ABS prices in Turkey followed suit as allocations from Europe and Asia to the country have been quite limited for another month.

“We achieved more than €200/ton hikes this month amid still-short allocations from Europe. Our request for additional volumes was not accepted,” reported an agent of a regional source.

As for Korean origin, a Turkish player reported to ChemOrbis, “We were able to receive a very small amount of ABS injection after paying around $100/ton in sync with notable gains in Asia.” South Korean ABS natural offers of up to $2000/ton CFR Turkey were talked for new shipments towards the end of the week.

Players attributed the hikes to an ongoing upward pressure from China, while questioning the sustainability of the rally in the medium term. “ABS prices have turned out to be hard to afford. We fear that the tightness may stretch into December,” opined a trader.
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