08 March 2013 09:23 [Source: ICB]
A 'first-world recovery' is needed to break out of sluggish conditions
If one thing was clear in the acrylonitrile markets as February came to a close, it's this: short of a global economic recovery, things are going to be tough for the next few months.
"What we really need is a first-world recovery," one market source said on 28 February.
Indeed, while many acrylonitrile (ACN) and acrylonitrile butadiene styrene (ABS) producers are complaining about the high price of propylene, the long-term fundamental problem facing these markets is the sluggish economies in the US and Europe.
"The key market for all of us is Asia," said one market participant that produces both ACN and ABS. "But as long as the economies in the US and Europe are down, the Asian market is going to be very, very cautious. And that caution will be reflected in the purchase of intermediate materials like acrylonitrile and ABS."
EUROZONE GDP CONTRACTS
In Europe, GDP for the euro countries contracted by 0.6% in the fourth quarter of 2012 and was down by 0.5% for the full year. Nothing has epitomized the economic doldrums facing Europe more than the auto industry, which saw sales fall to 19-year lows in 2012. US auto parts maker Federal Mogul announced that it is closing three of its European plants because of weak demand.
The US economy is struggling, as well. On 28 February, US fourth quarter 2012 GDP was revised upward from a contraction of 0.1% to a gain of 0.1%. For 2012, the US only grew at a 2.2% rate, up from 1.8% in 2011.
US AUTOS A BRIGHT SPOT
The one bright spot for ACN and ABS producers has been US auto sales, which grew by 13% year on year in 2012 to 14.5m units, up by 39.4% from an industry low of 10.4m units in 2009. Recent forecasts predicted February US auto sales would be even higher, at a 15.5m unit annual pace.
"Within the Americas, demand into ABS is increasing into March," said one industry source, noting the strength of the US auto market. "I would say it remains stable to good and improving."
Acrylonitrile producers are also hoping that home building will continue to show signs of strength. New-home sales in the US jumped 28.9% in January from a year earlier to the highest annual sales pace in four years, according to data released by the Commerce Department. Sales of previously owned homes rose by 9.1%.
Unfortunately, auto sales and new home construction are but blips in US and European economies that, overall, remain sluggish. Short of a global economic recovery, acrylonitriles look to be tough market for the foreseeable future.
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