22 November 2012 20:25 [Source: ICB]
The demand outlook for ABS use in car interiors looks grey
"[We are] still going to try for a reduction. [It] will be difficult but we will try," a distributor said after the styrene price settlement.
SUBDUED BUT STABLE
Demand in the European ABS market has been widely described as subdued but stable by both producers and consumers in October and November. Players on both sides of the market are keen to point out that demand is not declining week-on-week, and is faring relatively well given the poor economic environment.
"[November] demand is by far better than early month discussions make out," a producer said.
"The start [of November] is relatively moderate. Not low, not high," a distributor added.
Most of this demand is coming from consumers purchasing product to meet their contract obligations, and end-use markets taking material on a hand-to-mouth basis to keep production running.
Where ABS demand has been heavily affected is in the automotive sector. ABS is widely used in car interiors for dashboards and trims and for car door handles because of its strong but flexible qualities.
The European automotive industry has felt the brunt of the macroeconomic slowdown in 2012. New car registrations in the EU in September were down by 10.8% compared to the same month last year, according to the most recent figures from the European Automobile Manufacturers' Association.
Germany, France and Italy all saw registrations fall by double-digit figures compared to September 2011. ABS in passenger vehicles can be replaced by cheaper alternatives, such as high-impact polystyrene (HIPS) and polypropylene (PP). Some car manufacturers are also looking to use recycled ABS where possible, because it is cheaper and more environmentally friendly than pure ABS.
Because of this drop-off in demand from the automotive sector, and with expectations of destocking activity about to take place before year-end, ABS consumers are targeting reductions in their November prices, despite producers so far showing reluctance to move prices down.
The presence of larger quantities of Asian-produced material in Europe in recent months has also given buyers a slight edge in negotiations. Prices for Asian ABS injection moulding grade were heard as low as €1,650-1,750/tonne free delivered (FD) northwest Europe (NWE) last week.
Asian producers have been running at reduced output for some weeks, but are still keen to sell product in Europe because demand from the Asian ABS market has dropped off, and is unlikely to increase much before 2013.
South Korean producers in particular are helped by the low import duty for goods into Europe brought about by the EU-Korea Free Trade Agreement.
However, while considerably lower in price than European ABS, European consumers are often weary of purchasing product from overseas because of the 6-8 week delivery period, and the possibility of the product not meeting customer specifications on arrival.
Additionally, due to a thinning premium between Asian ABS and HIPS, market participants in Asia think they may see an increase in demand in the region, as manufacturers previously buying the cheaper HIPS may start to purchase ABS because of the latter's higher impact strength, possibly resulting in less exports to Europe.
However, despite the myriad reasons that could push ABS prices lower in November, producers are resisting, believing demand remains fairly stable and feedstock rates have not reduced sufficiently to pass on decreases to the market.
In addition, the recent force majeure at Shell Chemicals' 440,000 tonne/year styrene facility in Moerdijk, the Netherlands, has made ABS producers cautious in case styrene supply tightens, resulting in higher feedstock figures.
"The force majeure has given uncertainty, so [we are] rolling over prices," an ABS producer said on Friday.
This may not have such a large impact on ABS prices as first expected, however, as spot styrene prices were already retreating on 9 November following a $75/tonne (€59/tonne) gain in the immediate aftermath of the outage.
ABS producer Styron has also shut down a train at its facility in Terneuzen, the Netherlands, to carry out unplanned maintenance, which could see some impact on ABS availability depending on the length of the outage. However, it may slightly reduce demand for styrene during the force majeure.
"The maintenance is ongoing but in line with expectations, and should not have a major impact on supply" a Styron spokesperson said.
Producers will be watching the market closely throughout November's ABS negotiation period, and will work hard to maintain a rollover for November despite persistent attempts by buyers to secure decreases - and before thoughts turn to December and year-end destocking.
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