ABS Profit Declined on Limited Demand & Newly Added Capacity
The theoretical profit of ABS declined from RMB 1,663.05/mt in early May to RMB -546.8/mt on June 9, showing a rapid downtrend. With the changes in the supply and demand, the ABS industry started to face profit losses.
With the release of the newly added capacity and limited increment in the demand, the ABS profit kept falling form Q4 of 2021, and turned negative in May 2022.
On June 9, the ABS theoretical cost was RMB 13,546.8/mt, and the prices were RMB 13,150-13,300/mt, and the theoretical profit was around RMB -546.8/mt
The declined profits were mainly caused by the limited demand increment and newly added capacity. From April, the ABS inventory index remained above 90, indicating that the inventory was at a relatively high level. Recently, the ABS industry saw high inventory and high operating rate, while producers were unwilling to reduce production as they focused on maintaining or even expanding their market shares, leading to intensified market competition and dragging down the profit rates notably.
As of the end of June 2022, the newly added ABS capacity is expected to reach 2,800kt/a, accounting for 56.97% of the current total. With the accelerating capacity expansion, the competition will become fiercer, and the market will develop in a diversified way.
In the short term, producers will show less willingness in raising their prices after the profit decline. Market participants can pay their attentions to the cost and unexpected changes in units. On the whole, the ABS industry is seeing profit losses, and players are advised to pay attentions to multiple factors in order to control risks.
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