AFPM '19: US PC, ABS markets pressured by low-priced imports

Source: ICIS News

2019/03/23

HOUSTON (ICIS)--Low-priced Asian imports will continue to weigh on US polycarbonate (PC) and acrylonitrile-butadiene-styrene (ABS) markets into the second quarter.

Heading into this year’s International Petrochemical Conference (IPC), globally long supplies will likely continue to weigh on the PC market, outpacing still-sluggish demand and competing with US produced material.

China PC capacity expansions hampered import appetite there, forcing Asian exporters to find new markets for excess product including North America.

US producers have lowered freely negotiated prices on general purpose PC to remain competitive with Asian imports, which remain around $1.20s-1.30s/lb.

Although general purpose PC products have taken a dip, pricing for more specialised versions of the material have held firm. Buyers with specific material needs have continued to pay US prices, so domestic producers have not lowered rates on more specialised commodities.

Several market players said that PC volumes are likely to be down in the upcoming quarter, indicating a correction, as one participant called it, in supply levels, although further details were not available. Despite this, supplies are likely to remain ample and sufficient to meet demand.

There was some market sentiment that demand in second quarter will “likely [be] better than first quarter but far from robust”, indicating some pick-up but nothing substantial.

Sources cited global economic conditions as a factor in overall sluggish demand for the second quarter. Customers have adopted a wait-and-see approach to determine how US/China trade talks will effect tariffs and, subsequently, buying patterns.

Some buyers are holding out to see if the supply glut and hampered appetite will pressure down free-market prices even further.

Major US PC producers include Covestro and SABIC Innovative Plastics.

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US ABS prices could rise in April as demand begins to improve and upstream values for feedstock styrene continue to rise.

The US market will also be watching to see if demand improves in Asia, which would likely increase upward pressure on US ABS values.

Demand has begun to improve after falling according to seasonal norms in the fourth quarter of 2018.

Unless demand picks up in Asia, lower-priced material from that region will continue to weigh on US prices.

Demand in Asia could improve after some economic stimulus announced recently by the Chinese government aimed at the manufacturing sector, which is expected to lift demand somewhat in the near-term.

Demand for US material was strong in 2018 amid a robust economy. But the persistent concerns over the US-China trade war has made the outlook for 2019 more uncertain.

ABS is about 60% styrene, so styrene costs generally drive ABS price direction. US February styrene contracts were assessed by ICIS at an increase on 8 March. The styrene increase offset a decrease in February acrylonitrile contracts. March butadiene contracts rolled over.

Styrene prices have recovered slightly since the beginning of the year after plunging in the fourth quarter of 2018. Stronger upstream benzene prices have supported the rise in styrene.

North American ABS producers include A Schulman, INEOS Styrolution, SABIC and Trinseo.

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Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 24-26 March in San Antonio, Texas.

Focus article by Manar Hindi and Adam Yanelli