Think Tank: US ABS dodges sharp benzene increases, for now

29 November 2012 18:46  [Source: ICB]

US acrylonitrile-butadiene-styrene (ABS) market players should be giving thanks that the shift in the price spread between West Texas Intermediate (WTI) crude and benzene that revealed itself earlier in the year has not been the only disconnect in the business in 2012.

Since benzene stopped taking its cues from WTI and took its own direction, producers of ABS, styrene and other chemicals have been wondering how they can pass on cost increases to customers when demand does not justify higher prices.

Fortunately for the ABS market, the rocketing trajectory of the benzene contract price has not translated into a similar path for the price of styrene, although styrene costs have increased.

The costs for styrene, which accounts for about 60% of the chemical composition of ABS, have increased, but not nearly at the rate of upstream benzene. Styrene costs in monthly contracts from January to October 2012 have gone up in seven months, while moving down twice and remaining flat once. Benzene also increased seven times during the first 10 months of the year, while falling three times.

The November styrene contract price will not be settled until after the December benzene contract has been determined, which typically takes place early in the month. The styrene contract price falls a month behind the benzene contract price.

Looking at the cost of ABS, the ICIS-assessed domestic price for ABS high-impact injection material in bulk has increased by 3.4% in 2012. That increase is the result of up and down movements of ABS prices.

ABS producers have initiated several price increase proposals in 2012. The producers cited increased demand and higher feedstock costs for their price initiatives. As the year has progressed, though, demand has waned and the price pressure has been downward as imported material has competed for buyers.

During the past few months, ABS producers and buyers have kept a wary eye on the price of benzene. Spot price discussions for benzene have reached record high levels. Contract prices, which had not been above $4/gal until this year, continued to increase, with the November contract price hitting $4.90/gal, an increase of more than 55% since November 2011.

ABS producers were contemplating price increases as they saw benzene hit record highs and rising styrene costs. However, as the year nears its end, this is the time when demand diminishes as buyers aim to cut inventories.

By: Wesley Busch
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly