Asia styrenics demand may recover in Q3 on low inventory

Focus article by Clive Ong

SINGAPORE (ICIS)–Asia styrenics market, which has been doing poorly in the second quarter, may see some demand pick up from July ahead of a seasonal manufacturing period and amid low inventory, market participants said on Thursday.

For now the market looks weak and even though styrenic producers have been lowering offers to induce buying  their efforts have not succeeded so far.

Offer prices of acrylonitrile-butadiene-styrene (ABS) and polystyrene (PS) resins have been reduced by $20-30/tonne this week but sellers concede that demand has not picked up.

ABS offers were quoted mostly at around $1,580-1,620/tonne CFR (cost & freight) NE Asia and PS at $1,410-1,450/tonne CFR China this week, but these prices also failed to excite buyers.

“There is limited improvement in orders for finished goods for July, hence there is no need to pick up more resins in the near term”, said a large moulder in south China.

Weak performance in the Chinese economy continued to constrain manufacturing while economic malaise in the Eurozone has also curbed demand for China-made products.

Some traders, however, were optimistic of a rebound in demand from the second half of July, ahead to the third quarter manufacturing for exports season, which typically kicks off in August each year.

“Stocks among most end-users are low and hence users will have to replenish inventories soon,” said a trader in Hong Kong.

Market players expect better demand for resins in the third quarter as the sector comes off a tepid second quarter.

Manufacturing activities will pick up in the third quarter as exports for year-end holidays start to make their way to Europe and the US from around October.

“Demand will likely be better than that past few months although it might not compare with previous years”, said a resin end-user in China.

ABS is used to make toys, appliances, consumer electronics as well as in the automotive and construction sectors. PS is used for packaging, toys, consumer electronics and other consumer items.

Recent volatility in the feedstock styrene monomer (SM) prices has also dampened demand for resins. SM prices surged to $1,400/tonne CFR China on 10 June but have since fallen below $1,300/tonne CFR China according to ICIS data.

“The recent big swing in SM prices has made customer wary and many are delaying purchases,” said a resins maker in Taiwan.

With SM prices now on the downtrend, resin buyers preferred to wait and see, in anticipation of weaker prices in the near term. After all, most do not have large requirements for resins at this time.

“Demand is very weak despite low stocks among end-users,” said a resin producer in southeast Asia.

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