28 September 2012 10:25 [Source: ICB]
Acrylonitrile-butadiene-styrene (ABS) is the largest-volume engineering resin. Its largest use is in the automotive industry, followed by the electronics sector. Other applications include domestic appliances, pipes, fitting and other construction products, and recreational items such as boats and mobile phones.
Following the start of operations at INEOS's and BASF's Styrolution joint venture on 1 October 2011, Spanish producer ELIX Polymers will continue to focus on specialty ABS grades at its 180,000 tonne/year plant in Tarragona, Spain.
ELIX will act as an independent producer of natural, pre-coloured and specialty ABS grades after Switzerland-headquartered INEOS was required to divest its ABS operations by the European Commission as a condition of the joint venture.
The beginning of 2012 saw a steady rise in demand along with prices, but the second quarter saw demand drop off as ongoing weak macroeconomic conditions caused a loss of confidence in end-use markets. ABS, used in car interiors, has seen demand impacted by the decline in the automotive industry within Europe throughout most of the year.
New passenger car registrations in the EU fell by 7.8% in July and a further 8.9% in August, according to statistics published in September on the European Automobile Manufacturers' Association (ACEA) website.
However, reduced demand for ABS caused by the reduction in new vehicle production is being offset by a higher percentage of ABS being used in the actual construction of new car interiors. Additionally, while Europe has seen a decline in registration, sales of vehicles in Asia continue to be less affected by the ongoing poor macroeconomic conditions seen globally, with particular buoyancy in the premium car market. Producers said August showed better-than-expected ABS demand for the time of year compared to 2011. This was caused by early buyer restocking activity at the end of the month as market participants restocked after the summer holiday shutdown period.
Replenishing of inventories usually takes place in September, but expectation of further rises in both ABS and feedstock propylene prices drove buyers to start making purchases early. Demand in September has fallen from August after restocking activities finished. End-use markets continue to exercise caution when it comes to buying large quantities of product because of the uncertainty of prices. The market has adopted a wait-and-see attitude towards purchasing, with buyers watching the market for signs of price movements.
European ABS compounding and injection moulding grade prices rose by an average of €320/tonne from January to April, with extrusion grade ABS rising an average of €253/tonne, staying stable until June. Considerable falls in all three feedstocks - acrylonitrile (ACN), butadiene and styrene - saw prices drop sharply towards the end of June and again in July. However, prices rose in August despite summer shutdowns in end-use product manufacturing, particularly in southern Europe, on the back of increased raw material costs.
In September, the highest styrene prices seen since 2008 coupled with large hikes in September ACN costs continued to drive ABS prices up. Producers are looking to pass on increases of up to €90/tonne for September contract business, despite flat demand.
ABS is made by the polymerisation of styrene with ACN and butadiene (BD). Three main processes are emulsion polymerisation, suspension and continuous mass polymerisation - the last preferred because the reaction does not take place in the aqueous phase, resulting in less effluent disposal and lower energy needs. Resins with enhanced colour consistency can be produced, making painting unnecessary in certain applications. But, the emulsion route gives more flexibility in its products and is used to produce high-impact grades.
Challenges to the European ABS market are likely to come from Asia. There was limited pick-up in demand for ABS in Asia in the third quarter despite it being the traditional manufacturing season for exports. The weak US and eurozone economies have curbed demand for Asian finished goods, while the poor performance of Asian economies, including that of China, further reduced the consumption of ABS in the region.
Subsequently, with the euro strengthening against the US dollar, Asian-produced ABS is becoming more attractive to European buyers, despite additional logistics costs. The appeal of South Korean material is further strengthened by the reduction in import duty on South Korean imports as laid out in the EU-South Korea Free Trade Agreement, in force since 1 July 2011.
In a progressive approach, the FTA will eliminate 98.7% of import duty on South Korean ABS by 2016. Korean ABS producers, including LG Chem and Styrolution, have a nameplate capacity of 1.51m tonnes/year.
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