Weak China demand continues to add pressure on Asia ABS

06 September 2011 07:04  [Source: ICIS news]

By Clive Ong

ABS is used to make toys such as plastic ballsSINGAPORE (ICIS)--The downward pressure on the prices of acrylonitrile-butadiene-styrene (ABS) resin in Asia still remains because of the continuing weak demand in the key Chinese market, traders and producers said on Tuesday.

“The uncertainty about the US and eurozone economies has dampened demand for Asian exports and consequently consumption of ABS has also weakened,” said a trader in Hong Kong

The weak economic outlook in the US and the ongoing debt crisis in the eurozone reduced orders for finished goods flowing to Chinese factories this year.

“Moulders are having less orders this year, so naturally demand for resins also declined,” said a Taiwanese producer.

Spot ABS prices dipped below $2,200/tonne (€1,562/tonne) CFR (cost & freight) China in late August, from around $2,270/tonne CFR China in the early part of the month. However, the lower prices failed to attract buyers who mostly kept to the sidelines.

Besides weak external markets weighing down on demand, internally the Chinese government has taken a tough stance on inflation since late last year and adopted a stringent monetary policy.

“The reining in of credit by the government via the banks continues to hamper trades, and mid-to-small sized factories in particular face liquidity issues. Therefore, the ABS trade also slowed down,” said a Chinese ABS trader.

In China, major domestic ABS plants continue to operate at reduced rates of around 50%, in a bid to combat mounting stocks.

The margins among ABS makers remain thin or even negative as feedstock costs are elevated. Key feedstock styrene monomer (SM) prices have been hovering at around $1,500/tonne CFR China since late August because of the tight supply in the region.

“With SM at around $1,500/tonne, most producers require ABS prices to be at $2,300/tonne to come out even,” said a South Korean producer.

ABS is a plastic used in office equipment, consumer electronics, toys, automotives and construction.

The major producers in Asia include Taiwan’s Chi Mei and Formosa Chemical & Fibre Corp, South Korea’s LG Chem and Cheil Samsung, and Japan’s Toray Plastics.

($1 = €0.71)

For more information on acrylonitrile-butadiene-styrene, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Clive Ong
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