Asia styrenics margins under pressure from buoyant SM

18 July 2013 06:45 Source:ICIS News

By Clive Ong

PS is used for packaging, consumer disposables and toys, while the high-impact PS resins are used in consumer electronics. ABS, on the other hand, is used in making appliances, toys, consumer electronics, and has applications in the automotive and construction sectors.SINGAPORE (ICIS)--Styrenic resins margins in Asia are increasingly being squeezed, as prices could not keep up with the spike in cost of feedstock styrene monomer (SM) because of weak demand, industry sources said on Thursday.

Polystyrene (PS) prices are currently not budging at around $1,850/tonne CFR (cost and freight) China, despite producers’ efforts to hike prices to above $1,900/tonne CFR China, they said.

Acrylonitrile butadiene styrene (ABS) resins, meanwhile, are languishing in the low-$1,900/tonne CFR NE (northeast) Asia levels.

Feedstock SM, on the other hand, is hovering near the record high of around $1,850/tonne CFR China that was hit on 11 July, according to ICIS.

PS makers usually target a price spread of $150/tonne over SM, while ABS prices must be more than $300/tonne higher than SM, for resins makers to generate healthy margins, industry sources said.

PS is used for packaging, consumer disposables and toys, while the high-impact PS resins are used in consumer electronics. ABS, on the other hand, is used in making appliances, toys, consumer electronics, and has applications in the automotive and construction sectors.

“Demand [for] resins are weak and we have difficulty in raising prices,” said a southeast Asian producer, hinting that production may be further reduced because of poor margins.

Fears of an imminent correction SM prices, following recent sharp spikes, have prompted some resins producers to cut down on production.

“We try to limit production for spot market as a sudden reversal in SM would be detrimental for our business,” said another resin producer in southeast Asia.

“The weak Chinese exports sector have dampened demand for resins,” said an end-user of ABS and PS in China.

With the US and the eurozone – Asia’s major export markets in the West – still enmeshed with their respective economic ills, consumption on Asian-made goods has yet to improve.

Economic slowdown in the key China market is also dampening resins trade.

Resins demand is weak from various key sectors such as consumer electronics, appliances and automotive industries. But part of the weakness may also be stemming from current high prices of styrenic resins relative to other plastics, market players said.

“With other plastics like polypropylene (PP) trading in the $1,400/tonne [levels], prices of ABS and PS appear to be very high,” said a Taiwanese producer.

Traders are similarly cautious, preferring back-to-back business. Most did not want to hold large inventories in view of weak near term demand.

“We are trying to keep inventories manageable as demand is still weak despite the start of the manufacturing season,” said a Hong Kong-based trader.

($1 = €0.76)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By Clive Ong