August 1st news
In July, the Chinese ABS market saw a low-level upward trend, with spot prices for most grades rising and then stabilizing. According to Spotcom data, as of July 31, the average price of ABS sample products was 9,616.67 CNY/ton, an increase of 10.75% from the beginning of the month.
Fundamental Analysis
Supply Level: Entering July, the plant load in China's ABS industry remained largely stable with minor fluctuations. The overall operating rate at the end of the month was 58%, with the current weekly average production around 125,000 tons. Finished product inventory levels have been somewhat digested, decreasing to about 200,000 tons. Shipments from polymer plants showed a slight improvement within the period. In the short term, there is no expectation of a reduction in production. Overall, the supply side of ABS in July provided reasonable support for the spot price.
Cost Factors: In July, contrary to the earlier positive trend, U.S.-Iran relations took a turn for the worse, and the Middle East ceasefire agreement began to falter. The risk of resuming shipping through the Strait of Hormuz has increased, fueling market concerns about international crude oil supply and causing geopolitical premiums to rebound rapidly. Meanwhile, with China’s pure benzene market operating at low capacity utilization rates and supply remaining tight, pure benzene prices have surged strongly, driving styrene prices higher as well. However, supply-and-demand expectations remain relatively loose, limiting further upward room for prices. It is expected that the styrene market will experience volatile and weak trading conditions in the near term.
The acrylonitrile market, although suppressed by high operating rates and low consumption in the first half of the month, was supported to some extent by rising crude oil prices. As mid-month approached, the market stopped falling and began to rise. In the second half of the month, with Zhenhai Refining & Chemical reducing its load, supply in the East China region decreased. Additionally, a 260,000-ton acrylonitrile production line of Kingfa Science & Technology in Liaoning is scheduled for a 20-day maintenance shutdown in mid-August, which will further reduce supply and push up the market in the short term. However, new capacities from Zhejiang Petrochemical's 660,000-ton and Sino-British Petrochemical's 130,000-ton plants will soon come online, leading to continued oversupply in the acrylonitrile market. Meanwhile, with demand remaining flat, the price increase of acrylonitrile may be limited in the future.
In the butadiene market, during the early part of July, cost sentiment support and a tightening of spot supply in the market fueled a rise in prices amid a growing bullish atmosphere. However, as raw material prices increased, downstream capacity to absorb these costs weakened, leading to a gradual cooling in transactions for high-priced goods. By mid to late July, the positive impact on the cost side had diminished, and negative feedback from downstream became evident, causing a rapid decline in the market's enthusiasm for higher prices, with the market trend adjusting downward from its peak. For future market trends, it is recommended to monitor the rebalancing of profits between upstream and downstream sectors, as well as the strength of the traditional peak demand season in China.
Demand Side: In July, the operating status of downstream ABS enterprises showed limited changes. The main end-use appliance industry remains in the off-season, with weak consumption of appliance housings and no signs of improvement in end-user profitability. In the first half of the month, relatively concentrated spot restocking activities led to a surge in transaction volumes; however, once inventory levels were adequately replenished, buyers’ sentiment reverted to resistance toward high-priced supplies, and they tended to procure goods only as needed. There was little willingness among market participants to chase price increases, and traders adopted a wait-and-see approach, adjusting prices according to market conditions to recover funds. Overall, demand in July showed slightly insufficient momentum.
Future Market Forecast
In July, the ABS market in China experienced a rise followed by consolidation. During this period, the cost of the three main raw materials was relatively strong, and the production load at polymer plants remained within a narrow range. Inventory digestion was manageable, and supply within the market remained ample. Profit margins for ABS prices were moderate during this period, and there was increased resistance to selling higher-priced goods at the end of the month. The current market momentum is constrained.
Technical Analysis
Analysts believe that according to Spotcom, on July 10th, the 10-day moving average of ABS crossed above the 20-day moving average, and the positive average difference increased, but the moving averages crossed again at the end of the month. Additionally, auxiliary indicators show that the recent price of ABS is at a low level in the 5-tier system, while the distant prices are at varying alert levels, ranging from medium-high to medium-low. It is judged that in the short term, the spot price is experiencing a tangle between bullish and bearish forces, and it is recommended to closely monitor the international crude oil market and maritime shipping conditions in the Middle East for future market trends.
