FocusAsia ABS, SAN demand to remain weak; prices may fall further

18 April 2012 06:40  [Source: ICIS news]

By Clive Ong

ABS has applications in office equipment, consumer electronics, toys, automotives, while SAN is used in plastic items like fan blades, cigarette lighters, toothbrush holders, tranparent trays in fridges.SINGAPORE (ICIS)--Demand for acrylonitrile butadiene styrene (ABS) and styrene acrylonitrile (SAN) in Asia is expected to remain in doldrums given a general global economic weakness that affects China’s consumption of the resins, industry sources said on Wednesday.

China is a key market for ABS and SAN in the region.

Spot prices of the resins have been falling amid a languishing of demand this month – a situation that may extend through June, according to sellers.

ABS prices declined below $2,100/tonne (€1,596) CFR (cost & freight) NE Asia in early April, down from this year’s peak of $2,230/tonne CFR NE Asia in early March, according to ICIS.

SAN values, on the other hand, tumbled to the low $1,800/tonne CFR NE Asia levels this month, after peaking at around $1,935/tonne CFR NE Asia in the second half of February, ICIS data showed.

Although prices have come off from this year’s highs, end-users deem them still too high and are hesitant to commit to current prices.

A weaker-than-expected Chinese demand in April has dampened sentiment in the ABS and SAN markets, prompting traders in recent weeks to liquidate stocks.

Poor economic conditions in the US and the eurozone have curbed demand for Asian-made goods, resulting in softening consumption for resins this year.

“Demand for ABS and SAN in China is still weak. There is no significant improvement seen so far,” said a Hong Kong-based trader.

While some suppliers appeared optimistic that demand for the resins would pick up towards the middle of the year as the Chinese exports sector kick into higher gear in the third quarter, others were less sanguine as global economic growth remains challenging.

China itself has lowered its GDP growth target this year to 7.5% amid the global economic weakness.

“The improvement in demand in May and June is likely to be below expectations as the Chinese economy is slowing down”, said a resins distributor in south China.

Operating rates of ABS plants in China have declined to an average of 60% last week, from 70% in March. Producers have lowered output in a bid to keep inventories at a manageable level given waning demand.

“Producers are reducing output as demand is weakening and margins are really poor”, said a Taiwanese resins producer.

With feedstock styrene monomer (SM) prices in the high $1,400/tonne CFR China levels and acrylonitrile (ACN) and butadiene (BD) values at around $2,350/tonne CFR NE Asia and $3,400/tonne CFR NE Asia, respectively, the feedstock costs of ABS are around $1,937/tonne.

The spread between ABS prices at $2,100/tonne and the feedstock cost of $1,937/tonne is slightly above $160/tonne - way below the spread which most producers require at $300/tonne to generate margins.

“At current prices, all producers are losing money making ABS resins,” said a NE Asian producer.

ABS has applications in office equipment, consumer electronics, toys, automotives, while SAN is used in plastic items like fan blades, cigarette lighters, toothbrush holders, tranparent trays in fridges.

($1 = €0.76)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections


By: Clive Ong
+65 6780 4359



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