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Will low ABS demand in Asia outshine cost-driven hikes?

by Merve Madakbaşı -
  • 28/06/2019 (04:15)
Negative margins on the side of ABS makers coupled with higher spot butadiene prices in Asia helped import prices gain ground starting from mid-June in China. Southeast Asian ABS markets, however, have been unresponsive to the recent firming mainly due to discouraging buying appetite.

Poor margins forced ABS makers to reduce production

ABS producers across the region decided to lower their operating rates earlier in June in an attempt to cope with their negative margins considering higher styrene and butadiene costs. Suppliers adopted a stable to firmer pricing policy as they counted on the hikes in spot styrene prices in H1 June.

Moreover, spot butadiene prices were up to near $1100/ton FOB Korea by the middle of June, $80/ton above late May, which contributed to the firming trend for downstream ABS .

Activity is hindered by low end season

Many players agreed that the recent ABS gains were actually triggered by higher costs. Nonetheless, the recent increase requests have not boosted much buying appetite among converters in China.

“Manufacturers are mostly continuing to source just their needs nowadays. The low season for several applications and volatile styrene prices keep demand curtailed,” opined a player in China.

Is upstream taking its support away from ABS?

Spot styrene prices steadily rose in the first three weeks of June. However, they have edged down this week on an FOB Korea basis, erasing their previous gains earlier this month.

Moreover, spot ACN prices were corrected down starting from late May following relentless increases occurred during the previous months driven by a global tightness.

S. East Asia appears indifferent to firmer China

In the meantime, prices in Southeast Asia have followed a steady trend heading to July. A trader in Indonesia opined, “Prices were stable on the week while discounts of $20/ton were believed to be obtainable in case of firm bids. Demand has been muted since the end of Hari Raya Holidays, which caused ABS prices to defy the earlier gains in spot styrene.”

Asian players to hold waiting stance until after G-20 Summit

ABS players are planning to preserve their waiting stance over the near term in order to see the outcome of trade talks between China and the US amid G-20 Summit. The energy complex and feedstock costs remain as other factors to track closely for next week.
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