OUTLOOK ’19: Asia ABS, SAN demand seen weak despite US-China trade truce

SINGAPORE (ICIS)–Import demand for acrylonitrile-butadiene-styrene (ABS) and styrene-acrylonitrile (SAN) resins in the key China market is expected to remain tepid in 2019, despite the temporary truce achieved in the US-China trade war in early December.

Spot prices of ABS have fallen below $1,500/tonne CFR (cost & freight) NE Asia in December from around $2,075/tonne CFR NE Asia in June, ICIS data showed.

The escalation of the US-China trade war from the third quarter caused Chinese demand for resins to weaken, as end-users were hesitant to commit to purchases.

The tariffs implemented on appliances made in China for exports to the US has heightened uncertainty among ABS users, which adopted a wait-and-see stance on the market.

Output cuts among producers in Asia in the fourth quarter could not stem the decline in ABS prices as demand was lacklustre.

Buying momentum among Chinese end-users tapered off considerably after the third-quarter manufacturing-for-export season in China ended in October.

ABS resins are used for appliances, consumer electronics, toys, and have applications in the automotive and construction sectors.

In the SAN market, demand in China was just as weak with buyers hesitant to commit, especially to large cargoes, in view of the weekly decline in prices.

Traders also kept lean stocks as they did not want to be saddled with high-priced resins in a slumping market.

SAN resins are used for cigarette lighters, toothbrush holders, fan blades, fridge trays and host of consumer items.

Despite the pause in the trade war, a number of market players expect only a modest improvement in demand.

After all, the trade war truce is only temporary while tensions might escalate again after the 90-day cooling period.

End-users have low stocks after weeks of slow purchases, and some might decide to pick up some parcels if the price downtrend ends.

“Some end-users may replenish stocks in January, especially if prices stabilize amid the trade war truce,” a China-based trader said.

However, demand in Asia on the whole is expected to be soft with the Lunar New Year holidays kicking off across the region in early February.

Most of northeast and southeast Asia celebrate the Lunar New Year.

Manufacturing activities typically sees a low ebb in the first quarter before notching higher in the second.

“Demand hinges on the outcome, if any, of the trade war,” said a producer in Taiwan.

Focus article by Clive Ong

Click here to view related stories and content on the US-China trade war topic page