OUTLOOK ’18: European ABS, SAN markets brace for volatile upstream costs, demand healthy

LONDON (ICIS)–European acrylonitrile-butadiene-styrene (ABS) and styrene-acrylonitrile (SAN) market players expect stable growth but potentially volatile pricing for 2018, with raw materials set to continue influencing prices throughout the year.

Players from both sides of the market described growing demand in the last quarter of 2017, compared with previous quarters, with some predicting an overall growth rate in Europe of around 2%.

With both SAN and ABS being mature markets, growth for 2018 is forecast to remain stable and broadly in line with GDP growth for the region. For Europe ABS, demand from the automotive sector was particularly healthy.

A sizeable cost of the average new car comes from the plastics that go into to, and many interior components of new cars built in Europe are made from ABS or ABS blended with other products, such as polycarbonate (PC).

With the numbers of new car sales having grown throughout most of Europe in 2017, demand from this sector is healthy and expected to continue as such into 2018.

For SAN, some players expect that the compounding grade could see growth, as it is connected to downstream ABS demand which is expected to be healthy, while general appliance demand is anticipated to remain stable.

In terms of supply and demand dynamics in 2018 for both SAN and ABS, one significant factor is the situation in Asia in terms of pricing and demand in that region.

Sizeable volumes of both SAN and ABS in Europe are imported from suppliers based in Asia.

According to players from both sides of the market, however, this trend has softened in 2017, with many noting that prices from suppliers in Asia were not as competitive through much of the year compared to previous years.

The weakening strength of the euro versus the dollar in certain months is one reason for this and increasing demand in China is another, players agreed.

Two developments in China are expected to pressure this situation for ABS in counteracting ways.

The opening of Trinseo’s new plant in Zhangjiagang, which started-up in November 2017 and has a nameplate capacity of 75,000 tonnes/year.

The new capacity is expected to meet growing ABS demand in China and Asia more generally, which has also been healthy this year.

If demand in China and Asia is not strong enough to absorb the additional volumes from the plant, this could lead to softening prices in the region if supply outpaces buying appetite, which in turn could potentially lead to suppliers looking to export more material into Europe.

Having said this, some players in Europe see demand in China growing in 2018, due to new regulations banning the import of scrap plastics such as ABS and SAN, which will come into effect on 31 December 2017.

“[China is] using less scrap and more prime material, this can settle a trend for next year. They closed most imports of scrap [plastic], so there’s a lack of material [in China] due to that, [the] only solution is to use more prime material, and in general this will bring less imports into Europe, I imagine,” one ABS compounder commented.

In relation to pricing, SAN and ABS players forecast raw material cost fluctuations to once again dominate monthly discussions. An anti-dumping duty on monomer styrene is expected to be announced in February 2018 by the Chinese government. Any such regulation could well add to upstream volatility, as the duties could lead to fewer volumes arriving into China and the rest of the global market could as result of this lengthen significantly.

Upstream monomer styrene has been particularly volatile throughout 2017, with triple-digit peaks and troves not uncommon and players having to manage the rise and fall of raw material costs accordingly.

The first quarter (Q1) of 2018 is expected to be bullish for two reasons: a heavy schedule of planned turnarounds in the global styrene market and anticipated strong demand.

Bearing these factors in mind, players in both the ABS and SAN markets are preparing for price hikes in mid-Q1 (February-March) and some buyers could purchase additional volumes in early-Q1 in attempt to mitigate the potential hikes.

Overall, European SAN and ABS supply and demand levels are not expected to see any drastic change in 2018.

The dominant influencing factor for prices will likely continue to be raw material costs.

One area of uncertainty will be how suppliers react and adjust to the changing exchange rate and whether Asian imports into Europe will increase if the euro strengthens against the dollar.

ABS is the largest volume engineering thermoplastic resin and is used in automobiles, electronics and recreational products.

SAN is used to make toothbrush handles, pencil cases, cups, trays, and battery cases and certain grades can be compounded in to ABS.

(Picture source: Alan Chia/Wikimedia)