Asia ABS trade at parity to HIPS on weak demand

28 March 2013 07:41  [Source: ICIS news]

SINGAPORE (ICIS)--Asia’s demand for acrylonitrile-butadiene-styrene (ABS) has continued to weaken in recent weeks, with prices trading at a parity to high impact polystyrene (HIPS) prices, producers and traders said on Thursday.

Prices of ABS and HIPS are hovering in the low-$1,900s/tonne (€1,482/tonne) CFR (cost & freight) China, according to ICIS data.

ABS is normally traded at a premium of $200/tonne or higher over HIPS prices, but weak demand has eliminated the premium.

“ABS prices are way too low and suppliers are experiencing poor margins,” a South Korean producer said.

However, weak demand in the key Chinese market continued to weigh down on ABS prices, with sellers unsuccessful in implementing any price increase for their cargoes.

While its key feedstock styrene monomer (SM) prices have rebounded to above $1,700/tonne at one point during the week ending 29 March, ABS prices were largely unchanged.

“Demand is very weak and prices are unable to move higher despite strong SM [prices],” said a resin trader, who is based in Hong Kong.

The Chinese export sector remained in the doldrums, because of the weak economic conditions in the main export markets of the US and the Eurozone.

“With exports weak, demand for ABS in particular has been severely affected,” a Taiwanese producer said.

ABS resins are largely used in the manufacturing of appliances, consumer electronics and toys. The material is also used in the automotive and the construction sectors.

While demand for HIPS is equally weak, the supply of HIPS is relatively tighter than ABS, leading HIPS prices to hold up better than ABS.

“ABS stocks remain quite abundant in the market,” another trader in Hong Kong said. “After all, the capacity of ABS plants is much bigger than HIPS.”

The liquidation of ABS resins by market players over the past several weeks amid growing concerns over the Eurozone debt crisis has led prices to fall by more than $100/tonne since February.

“Despite the heavy selling by traders, stocks along the supply chain remains ample and that is why some producers have announced output cuts in April,” a southeast Asia-based supplier said.

A number of producers have indicated that they will lower their plant output in view of weak demand, with some considering a 50% operating rate in April.

The plunge in butadiene (BD) prices to around $1,500/tonne in the week from above $2,000/tonne a month ago has also dampened the market sentiment of ABS players.

“The sharp downtrend in BD prices have prompted buyers to refrain from buying, apart from what is absolutely necessary,” said a distributor in China.

Major ABS producers include Taiwan’s Chi Mei Corp (CMC) and Formosa Chemicals & Fibres Corp as well as South Korea’s LG Chem and Samsung Cheil.

($1  = €0.78)

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By: Clive Ong
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