Asian PS, ABS markets eye further declines in July as bearish forces gather

PS and ABS markets across China and Southeast Asia have remained on a persistent downward trajectory since mid-April, with the pace of declines accelerating markedly during the week ending June 26. Prices in both markets recorded another round of sharp corrections as weak downstream demand, abundant supply, and rapidly declining upstream costs converged to weigh heavily on sentiment, reinforcing expectations of further downturns in July.

The latest decreases came as crude oil and feedstock markets retreated sharply following the easing of geopolitical concerns in the Middle East. Spot styrene prices returned to levels last seen before the US-Iran conflict, while butadiene also slipped below pre-war indexes. Against this backdrop, sellers across the region continued to reduce offers aggressively in an attempt to stimulate buying interest. However, lower prices failed to revive trading activity as buyers largely maintained hand-to-mouth purchasing strategies while waiting for additional declines.

Residual war premiums remain embedded in import markets

Despite the prolonged downtrend, import styrenics markets have continued to trade substantially above their pre-conflict levels. The remaining premiums suggest that the correction process has not yet fully run its course.

ABS injection prices carry the largest residual gains. Import ABS prices in China remain approximately $220/ton above pre-war levels, while Southeast Asian prices still hold premiums of around $235/ton. Among PS grades, HIPS injection prices remain elevated by approximately $165-205/ton, while GPPS injection prices carry gains of $130-150/ton compared with levels seen before the conflict.

Notably, Southeast Asian markets have retained larger premiums than China across most grades. Therefore, the region still appears to have greater room for additional corrections should regional fundamentals remain weak.

Chinese domestic ABS market falls below pre-conflict levels

An important divergence has emerged within China, where domestic ABS prices have already fallen below pre-war levels. Local ABS injection prices are currently around CNY950/ton ($140/ton) lower than pre-conflict levels.

The sharp decline has widened the gap between domestic and imported materials considerably. In USD equivalence, Chinese domestic ABS values trade at discounts of as much as $534/ton against the country’s import indexes. Such a substantial arbitrage gap reflects intense competition among domestic suppliers, abundant local availability, and persistently weak downstream consumption.

Producers have faced mounting pressure from falling feedstock costs, sluggish demand from the home appliances and electronics sectors, and rising market inventories. Meanwhile, capacity additions have reportedly continued to outpace demand growth, forcing suppliers to sacrifice margins to maintain sales volumes.

In contrast, domestic PS markets remain above pre-conflict levels despite recent declines. GPPS injection prices still stand approximately CNY700/ton ($103/ton) above pre-war levels, while HIPS injection prices remain elevated by about CNY1175/ton ($173/ton). The remaining premiums hint at additional downside risks if upstream and downstream conditions fail to improve.

Multiple bearish drivers point to gloomy July landscape

The substantial residual premiums in both PS and ABS markets highlight that the recent correction has not fully caught up with the normalization of upstream costs and weakening market fundamentals. As a result, participants across the region increasingly anticipate another round of price decreases in July, driven by a combination of bearish cost dynamics, sluggish demand, and ample supply conditions.

Feedstock normalization removes key support pillar

Upstream markets have continued to normalize following the easing of geopolitical tensions in the Middle East. The US-Iran peace agreement and the gradual restoration of Gulf exports have reduced concerns over supply disruptions, exerting further pressure on crude oil prices.

WTI futures slipped below the $70/bbl threshold, while Brent crude settled near this level at the end of last week. Market participants increasingly expect crude prices to remain under pressure in the near term given potential supply growth amid recovering exports from Gulf producers. Even reports of attacks on vessels near the Strait of Hormuz have generated only limited market reactions, indicating that geopolitical risk premiums have largely faded.

The weakness has rapidly spread throughout crude oil’s downstream chains. Spot styrene prices on both CFR China and FOB South Korea bases have already retreated slightly below pre-war levels, trading at discounts of roughly $5/ton. Butadiene has also moved below its pre-conflict benchmark by around $25/ton. Although acrylonitrile prices remain significantly above pre-war levels, they recorded substantial declines during the week ending June 26, further reducing production costs for ABS manufacturers.

As most major feedstocks have now normalized, PS and ABS markets may require additional downward adjustments to fully align with current cost structures.

Buyers remain sidelined amid falling markets

Demand conditions across both China and Southeast Asia have been in a doldrum, offering little support to the market. Consumption from major end-use sectors, particularly home appliances, consumer goods, and electronics, has remained sluggish amid broader economic uncertainty and cautious consumer spending.

Buyers have increasingly adopted hand-to-mouth purchasing strategies while waiting for lower prices, with many of them anticipating that additional decreases may emerge in July. A Vietnamese trader remarked, “We still have materials on hand, so we don’t plan to replenish and will wait for additional discounts instead. We believe there will be a further slide in July.”

Meanwhile, a source from a Taiwanese producer commented, “Buyers prefer lower-priced materials for immediate requirements amid the ongoing off-season atmosphere.” Consequently, trading activity remains muted, and sellers continue to encounter resistance even after implementing sizable price cuts.

Supply overhang continues to pressure markets

Besides, supply conditions have been unfavorable, particularly in China. Although several producers have implemented maintenance shutdowns, capacity expansions and relatively high operating rates have continued to offset production losses.

Chinese inventories have remained elevated, while domestic competition has intensified significantly, especially in ABS. Excess availability in China continues to influence neighboring markets, limiting the ability of regional suppliers to maintain higher prices.

In Southeast Asia, supply has generally been considered sufficient. However, comfortable inventories among traders and converters have reduced immediate buying needs. The presence of competitively priced Chinese material has further intensified regional competition and constrained sellers’ pricing power.