An important outlet for acrylonitrile-butadiene-styrene (ABS) is the automobile industry, accounting for 25-30% of demand, followed by the electronics industry for use in computers, radios, televisions and telephone handsets. Special fire retardant grades are used in television housings. Other applications include domestic appliances such as refrigerators and sewing machines; pipes, fittings and other products used in the construction industry; and recreational goods such as boats and mobile homes. One particularly demanding application has been the moulding of Lego bricks to a tolerance of five thousandths of a millimetre.
Demand and supply balance of ABS in Asia has remained about equal. Major supply sources are from South Korea and Taiwan with China being the largest user and importer of the resin. Local supply in China has also increased over the years as plants were being built or expanded. However, China still imports more than 1.6m tonnes each year.
Demand for ABS resins was mostly below expectations this year. There was some optimism in the early part of the year, but this subsequently gave way to the realisation that ABS demand would not be as strong. The slow down in the Chinese economy and tight credit conditions have also affected the ABS trade. Medium to small trading outfits and users faced financing issues as credit lending has tightened since late last year.
Meanwhile, persistently weak economic conditions in the US and the eurozone has also curbed demand for Asian goods. Consequently, demand for ABS also declined in tandem.
Asia ABS prices hovered at around $1,940/tonne CFR NE Asia in January 2014. Optimism was then high that the US and eurozone economies appeared to be on a solid growth trajectory.
Market players expected ABS demand to pick up strongly after the Lunar New Year holidays in late January and early February. However, a lack of improvement in March saw ABS prices trending lower from high stockpiles along the supply chain. Traders were liquidating stocks while end-users refrained from picking up large parcels. Prices subsequently declined to $1,885/tonne CFR NE Asia in the middle of March.
Prices recovered to the low $1,900s/tonne CFR NE Asia in April and May, but mainly due to cost push. Buoyant feedstock styrene and acrylonitrile prices lifted ABS values. A pick up in demand in China was seen in late March to April but was deemed to be below expectations by most market players.
Users of ABS reported an increased inflow of orders for finished goods in May. These orders were for production in the third quarter. Anecdotal evidence suggested that orders received by molders this year has declined by some 10-15% from last year.
ABS is made by the polymerisation of styrene with ACN and butadiene (BD). Three main processes are emulsion polymerisation, suspension and continuous mass polymerisation – the last preferred because the reaction does not take place in the aqueous phase, resulting in less effluent disposal and much lower energy needs. Resins with enhanced colour consistency can be produced, making painting unnecessary in certain applications. But, the emulsion route gives more flexibility and is used to produce high-impact grades.
ABS demand is expected to improve into the third quarter but most market players expect any pick-up to be below expectations given that the nascent global economic growth appears to have fizzled out. The contraction of the US GDP for the first quarter and economic headwinds in the eurozone economies fuelled talk that demand for Asia made products will be weaker than the previous year.
The average operating rate of ABS units in China hovered at around 70% in the second quarter. Suppliers anticipate that output in Asia will not improve significantly in the third quarter and demand did not show signs of a revival.
Some market participants believed that the Chinese government might introduce a stimulus programme in the third quarter to boost domestic consumption and lift exports. However, with financing still a dampener to trade, market participants appeared to be bracing themselves for a slower than expected third quarter this year.
ABS suppliers in Taiwan and South Korea continued to look to markets outside Asia to mitigate the weak demand in China. Asia resins continued to make their way to the US, Europe and the Middle East as sellers move volumes overseas to keep inventories at a manageable level.