Weak Consumption Leads to Decline in ABS Prices in Mid-May in China

May 19th, News

In mid-May, the Chinese ABS market showed a weak trend, with spot prices for some grades being lowered. According to Spotcom data, as of May 19, the average price of ABS sample products was 10,700 CNY/ton, a decrease of 4.29% from the beginning of the month.

Fundamental Analysis

Supply Level: In mid-May, the Chinese ABS industry saw a mix of plant maintenance and resumptions. The current overall operating rate is above 58%, with a slight increase in overall load. The weekly average production is less than 130,000 tons, and the finished goods inventory has decreased to less than 200,000 tons. The shipment situation from polymer plants has declined compared to before the holiday. In the short term, there is still a small expectation of increased production. Overall, the supply side of ABS in mid-May provides moderate 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 sentiment suggests that the Middle Eastern conflict is likely to ease. However, it will still take time for shipping traffic through the Strait of Hormuz to fully resume, and the risk premium driven by the geopolitical stalemate between the U.S. and Iran remains. Coupled with the accelerating depletion of global oil inventories, this has spurred a rebound and upward surge in oil prices mid-month. Nevertheless, the transmission of this impact to the upstream three raw materials for ABS—a key product in the petrochemical chain—has been less than ideal. Although acrylonitrile supply remains tight overseas, Chinese industry units undergoing maintenance are gradually resuming operations, raising expectations of an easing in supply. At the same time, downstream demand has yet to show significant growth, leaving acrylonitrile prices stuck in a weak, consolidating range.

In mid-May, the butadiene market in China showed a narrow fluctuation. Although the cost support has weakened, some of the previous bearish sentiment has been cleared. On the other hand, with the reduction in industry load, there is an expectation of supply contraction. Additionally, the recovery in the operation of downstream industries such as synthetic rubber has led to some improvement in the previously sluggish terminal demand. It is expected that the bottoming-out forces for butadiene prices may form.

The styrene market continues to decline. From the perspective of raw materials, the rebound in crude oil prices has not been effectively transmitted to pure benzene. Styrene consumption lacks effective drivers, and the market's upward momentum is insufficient. However, there is still an expectation of a reduction in styrene supply, which may limit the price decrease in the styrene market.

Demand Side: In mid-May, the operating status of downstream ABS enterprises showed limited changes. The main end-use appliance industry is gradually entering the off-season, resulting in moderate consumption of appliance housings and no visible improvement in the profitability of end-user companies. Market sentiment leans toward buying at higher prices rather than lower ones, leading to a significant reduction in restocking and position-building activities. Meanwhile, traders who previously reaped profits are now engaging in low-price liquidation to recover capital, while buyers remain highly reluctant toward high-priced supplies. Overall, demand-side support for the ABS market remains weak.

Future Market Forecast

In mid-May, the ABS market in China softened. The production load of polymer plants continued to increase slightly, and the domestic supply remained abundant. The cost of the three main raw materials showed a weak adjustment. Currently, the ABS market is overshadowed by weakening demand. The spot price center has loosened, and trading in the market is relatively quiet.

Technical Analysis

Analysts believe that according to SpotCom, on May 14th, the 10-day moving average of ABS crossed below the 20-day moving average. Additionally, the auxiliary indicators show that the price levels of ABS in all five tiers are at recent lows and medium-term lows. This suggests an increased possibility of a weak consolidation and downward trend in the spot price in the short term. It is recommended to closely monitor international crude oil prices and maritime shipping conditions in the Middle East for future market trends.