Bottom-fishing and Replenishment Orders & Strong Raw Materials Drive Significant ABS Price Increase in January

February 2nd News

In January, the Chinese ABS market showed a fluctuating upward trend, with significant increases in the spot prices of most grades. According to the commodity market analysis system, as of January 31, the average price of ABS sample products was 9,350 CNY per ton, representing a year-over-year change rate of +13.33%.

Fundamental Analysis

Supply Level: During January, the load of China's ABS industry remained largely stable with slight fluctuations, showing a slight overall decline. Mid-month, some plant maintenance at Zhejiang Petrochemical was completed, leading to an overall reduction in the industry's operating rate by about 3% to around 67%, with the weekly average production dropping to 142,000 tons. The inventory of polymer enterprises remained flat at around 200,000 tons, and the market supply was in a tight balance. Overall, the supply-demand contradiction in the ABS market was temporarily alleviated, and the support from the supply side for the ABS spot price increased.

Cost Factors: During January, the strong performance of the three upstream raw materials for ABS had a positive impact on the cost end of ABS. In the acrylonitrile market, there was initially a calm news environment with mediocre demand, and some local inventories were under pressure, leading to consecutive price reductions by major suppliers. By the end of the month, overall production in East China factories decreased, with one facility at Silong shutting down, and the Jieyang plant of Jilin Petrochemical temporarily stopping for maintenance, resulting in a reduction in supply. Downstream users began to stock up at lower prices, causing the acrylonitrile market to rebound from its bottom, partially recovering the decline within the month and showing signs of an increase.

The butadiene market is showing a significant upward trend. At the beginning of the year, crude oil prices—the key cost input—remained relatively high, providing strong support at the lower end of the price range. On the supply side, plant maintenance, depleting inventories, and linkage with overseas markets have created multiple favorable factors. Meanwhile, high operating rates for cis-1,4-polybutadiene rubber on the demand side are sustaining steady underlying demand. The imbalance between supply and demand is driving the market to strengthen. In the short term, suppliers are likely to continue their stance of supporting prices, and plant utilization rates for cis-1,4-polybutadiene rubber will probably remain high, providing further support to the butadiene market. It is expected that the Chinese butadiene market will likely maintain a pattern of high-level fluctuations in the near term.

The styrene market also saw a significant price increase. The current industry resumption of work is below expectations, and supply-side support has strengthened. Overseas styrene plant maintenance has increased, and there has been a rise in inquiries and actual transactions for styrene exports from China, leading to further reduction in port inventory. The situation in the Middle East has supported crude oil prices, and the price of raw material benzene continues to rise. The fundamentals of the styrene market have improved significantly, and it is expected that the styrene market will remain at high levels and consolidate in the short term.

Future Market Prediction

In January, the ABS market in China showed a significant increase. The production load of polymer plants remained largely stable with a slight decrease, and the supply within the market returned to balance, with overall strong cost support. Analysts believe that the macro-level ABS supply-demand contradiction still exists; however, the strong momentum of buying orders at low prices in the early period has alleviated the pressure on production and sales. Nevertheless, the advance in demand has depleted the pre-Chinese New Year inventory buildup, and due to the relatively large price increases within the period, buyers' acceptance of prices has declined. It is expected that the ABS market may experience a consolidation phase in the future.