Raw Material Expectations Weak, ABS Market Shakes and Turns Down

May 11th, News

In early May, the Chinese ABS market saw a rise followed by a decline, with spot prices for some grades being reduced. According to Spotcom data, as of May 11, the average price of ABS sample products was 10,950 CNY/ton, representing a 2.06% decrease from the beginning of the month.

Fundamental Analysis

Supply Level: Entering May, the maintenance in China's ABS industry remains relatively concentrated, with an overall continued reduction. At the beginning of the month, the production loads at Zhenjiang Chi Mei and Shanghai Gaoqiao were reduced. In addition, maintenance was carried out at Tianjin Dagang and Zhangzhou Chi Mei. The current overall operating rate in the industry has dropped to around 57%, a decrease of 3% from the end of last month. The current weekly average production is less than 130,000 tons, and the finished goods inventory has been adjusted to within 200,000 tons. The polymer plants had good sales before the holiday, and there is still an expectation of reduced production in the short term. Overall, the supply side of ABS in early May provides reasonable support for the spot price.

Cost Factors: Since May, there have been frequent reports of a preliminary peace agreement between the U.S. and Iran in the Middle East, with high-level officials from both sides consistently sending out positive signals. Market analysts now believe that the Middle East conflict is likely to ease, shipping through the Strait of Hormuz could resume, and the supply gap will gradually narrow. Following the holiday period, the international crude oil market experienced a sharp sell-off, with both WTI and Brent crude oil futures plunging sharply to two-week lows. As a result, the upstream feedstock prices for ABS—also part of the petrochemical chain—were all put under downward pressure. Meanwhile, China’s consumption continues to decline, spot demand remains weak, and transactions are sluggish. However, the global shortage of acrylonitrile persists, keeping overseas prices at high levels and providing some support for exports. In addition, with strong upward momentum in propylene prices—the key raw material—acrylonitrile prices have seen a slight increase driven by rising costs.

In early May, the Chinese butadiene market experienced a weak downward trend, with an overall subdued trading atmosphere. The market is characterized by weakening cost support, relatively ample supply, and sluggish terminal demand. Bearish sentiment prevails among market participants; suppliers continue to ease their quoted prices, while downstream buyers remain cautious, aggressively pushing for lower prices. Most transactions in the market are small-scale and driven by immediate, essential needs. Coupled with lackluster performance in auctioned supplies, the market faces significant downward pressure, placing it firmly in a weak adjustment phase in the short term.

In terms of styrene market conditions, prices continue to decline. On the raw material side, pure benzene has recently been experiencing volatile price movements with a downward trend. Although imported supplies are limited and China’s supply-demand balance for pure benzene is becoming increasingly strong, this cannot fully offset the downward pressure caused by the sharp drop in crude oil prices. Meanwhile, styrene consumption lacks effective drivers, leaving the market with insufficient upward momentum. However, ahead of and during the holiday period, many styrene producers have scheduled maintenance and reduced production capacities; as a result, the downward pressure on styrene prices in the near future is expected to be somewhat restrained.

Demand Side: As we enter May, the operating rates of downstream ABS enterprises have shown little change. Consumption in the key end-use sector—electrical appliance casing—remains moderate, and end-user companies’ profitability has yet to improve. Market sentiment is characterized by a preference for buying at higher prices rather than lower ones; meanwhile, pre-holiday inventory still needs to be cleared, leading to a marked reduction in restocking and new-position-building activities. On the other hand, sellers with profit-taking positions are offering discounts to offload their holdings, while midstream traders are rushing to sell off after crude oil prices fell. Buyers, meanwhile, remain highly resistant to high-priced supplies, thereby exerting downward pressure on the price center within the current range. Overall, demand-side support for the ABS market remains weak.

Future Market Forecast

In early May, the ABS market in China rose and then fell. The production load of polymer plants continued to slightly decrease, and the supply within the market remained ample. The cost of the three materials was weakly adjusted. Currently, the ABS market is overshadowed by the negative impacts of falling costs and weak demand. At present, the spot price center has loosened, and trading within the market is relatively quiet.

Technical Analysis

Analysts note that, according to SpotTong data, on May 6, the 10-day moving average of ABS crossed above the 20-day moving average; however, the recent divergence between these two moving averages has been narrowing. Additionally, auxiliary indicators show that all five price levels for ABS are currently at or near recent lows, with the farthest levels hovering in the mid-to-lower range. We judge that, in the short term, the spot price is likely to enter a consolidation phase. In the near future, it is advisable to closely monitor developments in international crude oil prices and maritime shipping conditions in the Middle East.