Asia ABS soars on upstream gains; demand outlook uncertain

SINGAPORE (ICIS)–Spot acrylonitrile butadiene styrene (ABS) prices in Asia are set to rise further after posting strong gains over a two-month period, if recent spikes in feedstock costs do not ease up soon, market participants said.

Discussions this week hit fresh highs, with cargoes heard mostly indicated at levels well above $2,000/tonne CFR (cost and freight) NE (northeast) Asia for September delivery to China, industry sources said.

On 25 August, ABS traded in the range of $1,960-1,980/tonne CFR (cost and freight) northeast (NE) Asia, representing a 17% increase from two months ago, according to ICIS data.

The price uptrend is cost-driven mainly, ABS producers said, pointing to sharp increases in recent weeks in various upstream markets, from styrene monomer (SM), butadiene (BD) and acrylonitrile (ACN).

SM prices have risen at least $100/tonne in the last two months, and the upward momentum is still going strong, fueled by expected increases in demand for Asian supplies from global users caught short by plant outages in the US Gulf Coast in the aftermath of Hurricane Harvey.

Meanwhile, strong Chinese buying also sent the CFR China prices for BD soaring by more than 30% in the last two months, while ACN prices gained 7% in the same period.

To recover the sharp increases in raw material costs and protect their margins, ABS producers were heard looking to hike asking prices for spot availabilities by $100/tonne or more in September from August.

ABS supply is also going to stay fairly tight, as ABS makers are “hemmed in by their own low inventories” to cough up more prompt-delivery cargoes, a China-based trader said.

This will put additional upside pressures on near-term ABS spot prices, market participants said.

But not all players share a rosy outlook on ABS prices, given lingering reservations about demand conditions in China.

ABS demand is typically strong during summer – the usual peak season in China for the manufacturing-for-exports sector.

But this summer, ABS off-take in China had not been as robust as many had expected earlier, market participants said, in part because many downstream factories had found it hard to ramp up operating rates amid all the tight controls that the Chinese government had introduced on environmental protection and credit regulation.

End-users in China “are just mostly buying from hand-to-mouth, content with small parcels to keep production going”, a trader said.

Not many are keen to engage in stock-building purchases either, as they found current prices “already too steep”, another trader said.

Some users are already looking into cheaper replacement products such as high impact polystyrene (HIPS) to control their own costs and protect margins. If this trend picks up, ABS demand will be further dented, industry players said, which could in turn slow down the cost-driven ascent of ABS prices.

Focus article by Ai Teng Lim

Pictured above: Containers at Qingdao port in China. (Source: Sipa Press/REX/Shutterstock)