Costs Decline & Trading Activity Shrinks—ABS Market Quiet Ahead of the Holiday

February 9 news

In early February, the Chinese ABS market experienced a fluctuating decline, with spot prices for most grades being adjusted downward. According to the commodity market analysis system, as of February 9th, the average price of ABS sample products was 9,187.50 CNY/ton, representing a change rate of -1.74% from the beginning of the month.

Fundamental Analysis

Supply Level: Since February, the operating rate of China's ABS industry has been largely stable with minor fluctuations, showing a slight overall decline. The facility in Dagang, Tianjin, was shut down for a purge operation, leading to an overall reduction in the industry's operating rate by about 3% to around 64%, with the weekly average production dropping below 140,000 tons. The inventory of polymer enterprises continued to decrease to around 190,000 tons, maintaining a tight balance in the market supply. Overall, the ABS market shows a temporary equilibrium in supply and demand, with the supply side providing more support to the spot price of ABS.

Cost Factors: During the second ten-day period of February, the prices of the three upstream raw materials for ABS initially rose but then reversed course, weakening their impact on ABS costs. Among these, acrylonitrile followed the upward trend at the beginning of the month; however, with Yulong Petrochemical’s new acrylonitrile plant coming online, supply in northern markets increased. Coupled with the approaching Spring Festival, spot market demand softened somewhat, causing acrylonitrile prices to decline significantly after the initial rise.

The butadiene market is showing a trend of high-level retreat. Last month, crude oil prices at the cost end remained relatively high, providing strong support at the lower end. However, as the Spring Festival approaches, downstream industries are wrapping up pre-festival stockpiling, weakening the demand-driven support. Moreover, with industry operating rates remaining robust during the Spring Festival period, there’s an expectation of inventory accumulation in the coming months. The easing supply-demand balance is driving the market to consolidate at a weaker level. Nevertheless, the combination of previously low inventory levels and linkage with overseas markets has created multiple positive factors, suggesting that styrene prices are unlikely to fall significantly.

The styrene market has also seen a decline from its high levels. Previously, the resumption of work in China's industry was below expectations, while overseas styrene plant maintenance increased, leading to a rise in inquiries and actual transactions for styrene exports from China, which further reduced port inventory. However, with some facilities returning to operation recently, the supply side is warming up. Additionally, the positive impact of rising crude oil prices due to the situation in the Middle East is gradually fading, and the raw material benzene is stabilizing at a high level, leaving the styrene market without clear direction. It is expected that the styrene market will continue to consolidate during the Chinese New Year holiday.

Demand Side: In early February, consumption in the ABS downstream appliance casing industry—the main end-use sector—did not show any significant increase, and terminal enterprises’ profitability improvements remained limited. Meanwhile, with the Spring Festival approaching, pre-festival stocking has largely come to an end, and buyers are unlikely to further reduce their inventories. Trading activity within the market is gradually reaching a bottleneck; however, some high-price buy orders are still being executed. Currently, merchants’ inventory levels remain relatively low, and both companies and traders are maintaining firm price quotations. Overall, demand-side support for the ABS market is leveling off.

Future Market Forecast

Before the holiday, the ABS market in China was consolidating with a weak trend. The production load of polymer plants remained largely stable with a slight decrease, and the supply within the market maintained a tight balance, with the costs of the three main materials rising and then falling back. Analysts believe that the macroeconomic ABS supply-demand contradiction is still present, but the strong momentum of buying orders at low prices at the beginning of the year has alleviated the pressure on production and sales. Pre-holiday inventory replenishment for the New Year has been basically completed, and due to the significant price increase earlier, buyers' acceptance of prices has declined. It is expected that the ABS market will enter a period of calm consolidation in the future.