Bulls and Bears in a Tight Spot: ABS Rides Out High Levels at End of March

March 26 News

At the end of March, the Chinese ABS market was operating at high levels, with spot prices for some grades showing mixed increases and decreases. According to the commodity market analysis system, as of March 26, the average price of ABS sample products was 12,000 CNY per ton, representing a 34.43% increase from the beginning of the month.

Fundamental Analysis

Supply Level: In the second half of the month, the Chinese ABS industry saw a mix of restarts and maintenance, with overall load changes being limited. Mid-month, Huajin Chemical's Line 1 resumed operations, while Ineos Styrolution shut down for maintenance. The overall operating rate in the industry was around 69%, with weekly production averaging close to 150,000 tons, and finished goods inventory rose to 200,000 tons. With little change in production in the short term, the market supply shifted from a tight balance to ample. Overall, the support from the ABS supply side for the spot price remained steady but slightly weaker.

Cost Factors: In late March, geopolitical tensions in the Middle East intensified, continuing to raise concerns among industry players. Moreover, crude oil production in some countries has been significantly reduced due to force majeure events. Coupled with OPEC+’s firm stance on production cuts, international oil prices have recently been fluctuating at high levels. Meanwhile, the upstream feedstock prices for ABS—a petrochemical product—have generally risen to high levels. Among these, the market price of acrylonitrile has seen an even greater increase. Due to reduced arrivals at ports, spot supplies in China have been smoothly depleted, and in some regions, an export window has even emerged. Major suppliers are maintaining strong pricing and raising their quotes accordingly.

Recently, the butadiene market price in China has continued to increase. Similar to acrylonitrile, the domestic market demand is stable, and the lack of imported materials has led merchants to quote higher prices. However, downstream enterprises such as styrene-butadiene rubber are facing high cost pressures, and some plants are reducing their load to lower costs, leading to a contraction in the rigid demand procurement of butadiene. The subsequent price increase of butadiene may be hindered as a result.

Styrene prices showed slight fluctuations and modest increases. The price of the feedstock, pure benzene, has been experiencing wide swings, closely following the sharp rises and falls in crude oil prices. Although downstream end-users have been slow to follow suit, hindering price transmission, overseas plants have reduced their operating rates, suggesting that pure benzene prices may trend stronger in the near future. Moreover, due to persistently high costs, downstream production has been constrained, leading to a month-on-month decline in output and limiting any significant increase in demand. In the short term, the styrene market is expected to remain at relatively high levels; close attention should be paid to changes in market supply and demand as well as fluctuations in crude oil prices.

Demand Side: At the end of March, the start-up rates of downstream ABS enterprises fell short of expectations. Consumption in the key end-use sector—electrical appliance casing—remained moderate, and the profit improvement among end-user companies was limited. The atmosphere of chasing higher prices in the market eased, and activities related to restocking and building inventories declined. Meanwhile, at month-end, traders offloaded their profit-taking positions to meet their targets, thereby pulling down the price center of gravity. Currently, ABS finished-product inventories are accumulating, and both manufacturers and traders are adjusting their quoted prices according to market conditions. Overall, demand-side support for the ABS market remains moderate.

Future Market Forecast

As the end of the month approaches, the Chinese ABS market is consolidating at a high level. The production load of polymer plants has seen limited changes, and the supply in the market is gradually easing. The cost of the three main raw materials remains positive. Analysts believe that the current ABS market is still in a tug-of-war between strong costs and weak demand. With large-scale production capacity, finished goods inventory is accumulating rapidly. Currently, the spot price is at a high level, and buyers are showing resistance to high-priced goods, with market transactions returning to weak essential demand. It is recommended to closely monitor international crude oil prices and maritime shipping conditions in the Middle East for future market trends.