INSIGHT: Asian ABS and SAN producers still enticed by Europe

17 April 2013 17:26  [Source: ICIS news]

By Matt Tudball

LONDON (ICIS)--Asian producers of acrylonitrile-butadiene-styrene (ABS) and styrene acrylonitrile (SAN) still see Europe as a market worth targeting, despite the weak economic environment, the latest trade data show.

Imports from countries such as South Korea and Taiwan are up year-on-year with the trade flows quite surprising in some cases.

Statistics agency Eurostat recently released import and export data for 2012, allowing comparison of trade flows to and from Asia and the wider world. 

For many years, Asian producers have had a presence in the European SAN and ABS markets, exporting material during low-demand seasons in Asia, or when exchange rates give a favourable arbitrage window.

However, since the economic crisis in 2008, trade patterns have become less predictable. And they continue to change in 2013.

The data below from Eurostat show the top five exporters of ABS and SAN into the 27 member countries of the European Union, ordered by the total volumes in tonnes the EU imported from 2005 to 2012.

ABS

Country/Period

Jan.-Dec. 2005

Jan.-Dec. 2006

Jan.-Dec. 2007

Jan.-Dec. 2008

Jan.-Dec. 2009

Jan.-Dec. 2010

Jan.-Dec. 2011

Jan.-Dec. 2012

Total 05-12

South Korea

56,096

78,350

112,503

120,464

96,038

99,504

89,896

92,211

745,061

Taiwan

52,745

48,689

55,549

50,963

39,658

43,105

40,214

35,665

366,587

United States

10,169

13,191

13,203

9,478

4,860

6,886

4,227

4,526

66,538

Thailand

3,843

3,968

6,249

9,702

8,276

10,394

10,177

11,450

64,059

Japan

5,381

6,105

6,379

6,078

2,770

4,065

4,677

3,633

39,087

SAN

Country/Period

Jan.-Dec. 2005

Jan.-Dec. 2006

Jan.-Dec. 2007

Jan.-Dec. 2008

Jan.-Dec. 2009

Jan.-Dec. 2010

Jan.-Dec. 2011

Jan.-Dec. 2012

Total 05-12

South Korea

2,948

4,194

4,026

3,801

3,311

3,021

5,596

14,426

41,322

United States

2,109

2,518

2,139

9,258

4,489

3,354

1,404

1,324

26,594

Mexico

103

1

39

2,627

5,659

6,702

2,396

1,531

19,058

Japan

1,877

2,295

1,953

2,307

1,272

2,784

1,635

984

15,107

Taiwan 

787

1,165

1,022

1,039

1,672

1,383

2,549

3,434

13,050

The biggest surprise is that the EU's SAN imports from South Korea were almost three times greater in 2012 compared with 2011 and well above earlier years.

Also of note, over the same period, SAN imports from Taiwan rose 35%. The other three in the top five – the US, Mexico and Japan – all saw drops in their arbitrage into Europe. 

This impressive increase should be put into context, though. In reality, the 14,000 tonnes of SAN imported from South Korea was only 0.9% of the country’s total nameplate production capacity.

According to ICIS data, South Korea has the capacity to produce more than 1.5m tonnes of SAN per year, so the 14,000 tonnes sent westwards is a very small drop in the plastics ocean.

ABS data showed a much less dramatic shift in South Korean trade, with only a 3% increase year-on-year in 2012. However, of note in the ABS market was that, whilst imports from South Korean rose, imports from Taiwan dropped by 11% over the same period.

The most likely explanation for the significant increase in SAN imports from South Korea and the drop in ABS imports from Taiwan is the free trade agreement (FTA) between the EU and South Korea.

The FTA came into effect on 1 July 2011 and aims to make 99.9% of EU-South Korea trade duty free by 2031 on an incremental, step-by-step basis.

Duty on South Korean imports dropped to 3.2% for ABS, and zero per cent for SAN, according to sources in the ABS and SAN market (an actual time frame and details of the reductions are frustratingly hard to find on the EU’s FTA website), making South Korean imports more attractive to European buyers prepared to wait the 40 days for delivery.

“For sure the increase [in imports for SAN and ABS] was due to the free trade agreement that increased dramatically the competitiveness of Korean SAN and ABS,” a European ABS and SAN buyer said, adding that Taiwan lost volumes of ABS exports because of the FTA.

However, other players in the European market see the increases in ABS, and SAN imports in particular, as a warning sign of poor global demand, especially in the key Chinese market.

“I guess the more determining factor [for increased imports of SAN] is the bad demand in China,” another buyer said.

Demand for both ABS and SAN in China has failed to pick up following the Lunar New Year in February. Since then, Asian producers have found themselves with excess stock and no domestic demand, and need somewhere to offload volumes.

One European producer noted that, whilst China imported 1.7m tonnes of ABS in 2012, this was a 10% drop from the previous year, indicating a drop in demand, and causing Asian producers to be more active in pursuing European buyers.

Despite economic problems in Europe, Asian-produced SAN remains attractive to European buyers, with one buyer of SAN hearing product available for purchase now at approximately €1,776/tonne ($2,337/tonne) cost, insurance, freight (CIF) to the UK.

“The gap has narrowed a little this month [April] with the euro reduction [euro weakening against the dollar], but Asian prices are still attractive for European buyers and [are] worth waiting for the 40 day delivery time,” a UK-based buyer said.

European SAN producers saw another reason for the increase in imports in the Eurostat data.

“LG in Poland is pushing more product into Europe,” a European SAN producer said, referring to the LG Electronics’ (LG) factory in Wroclaw, Poland. Both LG and Samsung have EU-based production facilities into which they import Asian-produced SAN, which would be captured in the Eurostat data.

European producers are less worried about increases in ABS imports, though, as a weakening euro and a significant narrowing of the gap between European and Asian-produced ABS makes Asian imports less appealing.

“Asian producers are not so super aggressive [in Europe] due to the exchange rate. Lower costs are more or less compensated by the exchange rate,” a major European ABS producer said.

However, the picture for ABS imports could change if feedstock costs in Asia head downwards, allowing Asian producers to offer lower rates to European buyers. Feedstock butadiene (BD) prices fell by 25% in Asia from 1 to 22 March. Styrene has started to firm following recent drops, and acrylonitrile (ACN) remains stable in Asia.

With no signs of a pick-up in Asian demand to soak up excess volumes, the flow of product from Asia to Europe, whilst not torrential, is likely to remain a constant presence throughout 2013.

($1 = €0.76)

Read Paul Hodges’ Chemicals and the Economy blog
Bookmark John Richardson and Malini Hariharan’s Asian Chemical Connections blog


By: Matt Tudball
+44 208 652 3214



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