Demand Side Enters at Lower Levels; ABS Rallies from Low Levels by End of December

January 1st news

In late December, the Chinese ABS market showed a low-level increase, with some grades reporting higher spot prices. According to the commodity price analysis system, as of December 31, the average price of ABS sample products was 8,250.00 CNY/ton, with a year-on-year change rate of -3.82%.

Fundamental Analysis

Supply Level: Since December, the load of China's ABS industry has been largely stable with minor fluctuations. There have been increases and decreases within the period; Jilin Petrochemical increased its load, Zhejiang Petrochemical completed some plant maintenance tasks, and a facility in Shandong reduced its load. By the end of the month, the overall operating level of the industry was around 69%, with an average weekly output of about 150,000 tons. The supply in the market remained ample, with polymer enterprises' inventory slightly decreasing from a high level above 250,000 tons. Overall, the long-term loose supply pattern in the ABS market remains unchanged, and the supply side continues to provide weak support for the ABS spot price.

Cost Factors: During December, the price trends of the three upstream raw materials for ABS diverged, having a generally moderate impact on ABS costs. Specifically, the capacity utilization rate in the acrylonitrile industry remained above 80%, leading to an increase in oversupply and rising inventories, which caused market prices to fluctuate downward. Meanwhile, downstream users maintained ample inventory levels, resulting in only moderate purchasing activity and sluggish spot market transactions. In the short term, prices are still expected to continue declining; however, cost pressures persist and continue to limit the extent of any further price declines.

Butadiene market conditions in the first half of the month were similar to those of acrylonitrile, with ample supply and consistently weak downstream demand, leading to a generally weak and volatile market under the dual negative impacts. However, in the second half of the month, influenced by the increased willingness of suppliers to hold prices firm and the upward trend in foreign market prices, low prices are now hard to find in the market. Moreover, the capacity utilization rates of major downstream products such as polybutadiene rubber and styrene-butadiene rubber have remained high, with stable procurement demand, driving the butadiene market price to fluctuate and rise.

This month, the styrene market in China experienced a post-rally consolidation. Although the raw material benzene market faced demand constraints that hindered price increases, unplanned shutdowns of styrene plants during the month strengthened the supply side. At the same time, some downstream profits improved, leading to a rise in operating rates. Additionally, the export market performed well at the end of the month, with steady demand. By the end of the month, the styrene market showed signs of recovery. However, it is expected that the supply will increase and more shipments will arrive at the ports in the near future, suggesting that the styrene market in China may experience a range-bound fluctuation in the short term.

Demand Side: In December, consumption in the ABS downstream sector—particularly in the electrical appliance casing industry—softened, leading to less-than-satisfactory profit margins for end-user companies. As a result, production schedules for the coming period show no signs of increase. However, toward the end of the month, spot prices fell to low levels, prompting buyers to step in and place additional orders at lower prices. Consequently, downstream demand for ABS has seen a temporary surge, and the flow of goods has improved. Merchants have begun to reduce their inventory levels, while both manufacturers and traders are attempting to quote higher prices. Overall, the demand side shows slightly improved support for ABS market conditions.

Future Market Prediction

At the end of December, the ABS market in China experienced a rebound from a low position. The production load of polymer plants remained largely stable with minor adjustments, and the consumer end saw the release of short covering. Analysts believe that the supply-demand contradiction for ABS remains, while the support from the upstream raw material market is moderate. Recently, there has been a strong momentum of buying on dips, which has alleviated supply pressure in the short term. It is expected that the ABS market will consolidate at a high level in the future.