Weak Demand and Strong Supply in the Off-Season, ABS Prices Decline in July

August 1st, according to reports

Since July, the overall trend in the ABS market has been weak, with spot prices for some grades declining. According to the commodity price analysis system, as of July 31, the average price of sampled ABS products in China was 10,312.50 CNY/ton, a decrease of 2.94% compared to early July.

Fundamental Analysis

Supply Level: Throughout July, the overall operating rate of the ABS industry in China remained largely stable with minor fluctuations, adjusting from 66% at the beginning of the month to around 67%. The average weekly production stabilized above 120,000 tons, and by the end of the month, the inventory of polymer enterprises reached a high level of over 220,000 tons, indicating ample supply in the market. At the beginning of the month, Haijiang Chemical resumed operations after maintenance, and new capacity from Liaoning Kingfa was released. In the second half of the month, a series of plants, including Dalian Hengli, increased their production, further relaxing the supply situation. Overall, the long-term supply surplus in the ABS market remains unchanged, but the industry's inventory is relatively manageable. In summary, the supply side provides limited support to the ABS spot price.

Cost Factors: In July, the upstream market for ABS raw materials generally experienced two rounds of fluctuations and consolidation, providing limited support to ABS costs. The acrylonitrile (ACN) market remained relatively stable, with enterprise capacity utilization rates and production volumes remaining largely unchanged. Although the Shandong Haijiang plant remains shut down, Jilin Petrochemical plans to commission a 260,000-ton ACN expansion unit by the end of July, and Liaoning Jinfa Technology's 260,000-ton ACN plant is expected to restart and resume operations at the end of July. These anticipated supply increases continue to influence market sentiment. Downstream overall capacity utilization rates have significantly declined, with enterprises purchasing raw materials according to demand, leading to weakened overall demand. Coupled with somewhat insufficient cost support, it is expected that the acrylonitrile market will likely remain in a state of stalemate in the short term.

The Chinese butadiene market saw a decline in the first half of July, followed by a rebound in the second half. In the early period, due to insufficient demand, the main production areas actively promoted external sales, leading to some unsold inventory, and major refineries reduced their factory prices one after another. In the latter half of the month, as port inventories in the East China region were digested and new arrivals were insufficient, market sentiment improved, and companies shifted to premium transactions. It is expected that under the influence of weak fundamentals, the butadiene market may continue to show a generally weak and volatile trend.

In terms of styrene, the market fluctuated and declined during July. The upstream crude oil and benzene prices were volatile, and although there was an upward trend at the end of the month, it did not provide adequate support for styrene. Meanwhile, the port inventory continued to increase, and some downstream enterprises in the three S sectors saw their losses expand. Under the pressure of high finished product inventories, they continued to halt production and reduce loads, leading to a decrease in demand for styrene. Currently, the fundamental weakness of the styrene market is difficult to change, and it is expected that the market will continue to operate weakly in the future.

Demand Aspect: For a long time, ABS downstream factories have maintained moderate operating rates. Currently, the market is in the traditional off-season period, and end-user companies continue to purchase only to fulfill immediate needs. Since July, concerns about market sentiment triggered by deteriorating geopolitical conditions in the Middle East have largely been absorbed. However, industry participants are now more worried about uncertainties regarding future U.S. tariff policies and their potential impact on market demand. A cautious atmosphere prevails within the market, with slow movement of goods. China's inventory remains at high levels, supply continues to be ample, and there is significant room for destocking. Overall, demand-side support for ABS prices has not improved either.

Future Market Forecast

In July, the Chinese ABS market continued to show a weak and consolidating trend. The overall prices of the three main raw materials upstream were relatively weak, while the production load of ABS polymer plants saw a slight increase with general stability. Demand remained at a low season level. Analysts believe that ABS has been dragged down by supply-demand contradictions for a long time, making it difficult for the spot price to improve. It is expected that in the short term, the ABS market may continue to maintain a consolidation pattern.