Think Tank: Asian producers drawn to Europe

26 April 2013 10:11  [Source: ICB]

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 trade flows quite surprising in some cases. Statistics agency Eurostat has released import and export data for 2012, allowing comparison of trade flows to and from Asia and the wider world.

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Plenty of Asian polymers are heading for Europe

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 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 by 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, however. In reality, the 14,000 tonnes of SAN imported from South Korea was only 0.9% of the country's nameplate 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, while imports from South Korea 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.

However, other players in Europe see the increases in imports of ABS, and particularly of SAN, as a warning sign of poor global demand, especially in China. Demand for both ABS and SAN in China has failed to pick up following the Lunar New Year. Since then, Asian producers have found themselves with excess stock and no domestic demand, and need somewhere to offload volumes.

Despite Europe's woes, Asian-produced SAN remains attractive to European buyers. With no signs of a pick-up in Asian demand to soak up excess volumes, the flow of product from Asia to Europe is likely to remain constant in 2013.

By: Matt Tudball
+44 208 652 3214

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