Supply Strong, Demand Weak: ABS Continues to Fall in August

September 1st, news:

In August, the overall trend of the Chinese ABS market remained weak, with spot prices for most grades continuing to decline. According to the commodity price analysis system, as of September 1st, the average price of ABS sample products was 10,125 CNY/ton, a change rate of -1.82% compared to early August.

Fundamental Analysis

Supply Level: Since early August, the operating rate of China's ABS industry has risen and then stabilized. In the first half of the month, the Dalian Hengli plant restarted, and the Tianjin Dagushan equipment pipeline cleaning was completed. In the second half of the month, there were limited changes in plant operations, and the overall operating rate of the industry rose from 67% at the end of July to 71% and then remained largely stable. The average weekly production at the end of August was at a level of 140,000 tons, with polymer enterprises' inventory at a high of 230,000 tons, showing an increase. The supply in the market remained ample. Overall, the long-term loose supply situation in the ABS market remains unchanged, and the high inventory in the industry is relatively controllable. However, it is heard that Chimei Zhenjiang and Jinnfa Liaoning plan to increase their operating rates, which is expected to further loosen the supply. Therefore, the supply side provides weak support for the ABS spot price.

Cost Factors: In August, the upstream market for ABS’s three key raw materials remained largely stagnant, providing limited support to ABS costs. At the beginning of the month, Zhejiang Petrochemical and Sinochem Quanzhou in East China reduced production at their acrylonitrile units, leading to a drop in the industry’s capacity utilization rate and prompting market quotes to rise slightly. However, as supply within the market increased, consumer demand failed to keep pace, resulting in growing inventory pressures in certain regions. Meanwhile, with the price of raw material propylene declining, acrylonitrile prices reversed earlier gains and stabilized instead.

The Chinese butadiene market rebounded in August after a decline, operating with narrow fluctuations. In the first ten days, overall demand was mainly for essential needs, and the decline in spot prices attracted some restocking, but these were transient demands. Starting from the middle of the month, the market sentiment began to improve due to the rise in downstream product prices, and major refineries in China raised their factory prices. Currently, supported by demand, it is expected that the butadiene market will mainly maintain a stable and slightly strong trend in the short term.

In terms of styrene, the market mainly fluctuated in August. At the beginning of the month, there were fluctuations in factory loads, with frequent restarts and maintenance of facilities. There was also new capacity added. Meanwhile, the operating rates of the downstream three S sectors showed a mixed trend, with an overall decrease in demand. Throughout the month, the market was caught between bullish and bearish factors, making it difficult to say that the fundamentals were strong. However, multiple facilities have announced maintenance schedules for September, leading to expectations of a stronger supply side. It is expected that the styrene market in China may warm up in the future.

Demand Side: For a prolonged period, downstream ABS factories have maintained modest operating rates. Currently, the market is transitioning between peak and off-peak seasons, yet end-user purchasing activity remains sluggish, with demand still driven primarily by essential restocking needs. In mid-August, production scheduling in the appliance casing industry further declined, reflecting shrinking consumer demand. Meanwhile, with no significant shifts in the broader macroeconomic environment, cautious sentiment persists in external markets, leading to slow-moving supply flows. Meanwhile, Chinese inventories remain at historically high levels, contributing to an ongoing supply surplus and creating ample room for inventory reduction within the market. Overall, demand-side support for ABS prices continues to show no signs of improvement.

Future Market Forecast

In August, the ABS market in China was relatively weak and consolidating. The overall changes in the upstream raw materials were not significant, and the production load of ABS polymer plants increased and then stabilized. The demand remained at a low season level. Analysts believe that the spot price of ABS has been dragged down by the long-term supply-demand contradiction, making it difficult for the market momentum to improve. However, as the traditional peak season is about to begin, it is recommended to closely monitor the increase in demand.