Profit of ABS Shrank Dramatically

Benefiting from the strong demand, the theoretical profit of ABS averaged at RMB 2,733/mt in 2017, which was the highest level in the past 10 years. The second highest was RMB 2,151/mt in 2010. However, time has changed. With the changes of supply and demand structure as well as the internal and external environmental, the ABS’s high profit has begun to shrink dramatically.

In May, the theoretical profit of ABS was about RMB 1,620/mt. Although this number looks favorable, it has fallen by more than a half than more than RMB 3,000/mt at the end of 2017. Changes in the structure of supply and demand also directly led to the increase rate of ABS ex-works prices lagging behind the increase rate of upstream feedstock prices.

The ABS feedstock prices rose notably in May. The acrylonitrile prices rose first and then fell, with the average price rose by RMB 700/mt month on month. The butadiene and styrene prices surged by RMB 1,500/mt and RMB 1,050/mt respectively. The theoretical cost of ABS moved within RMB 13,886-14,660/mt in May, and those of low-end and high-end resources rose by RMB 832/mt and RMB 1,104/mt respectively.

By comparison, the ABS ex-works prices only increased by RMB 500-600/mt. Individual prices increased more. The ABS ex-works prices were RMB 15,510-16,400/mt at the end of May. The increase in ex-works prices was obviously less than that of feedstock prices, resulting in a significant contraction in theoretical profit. In later stage, the theoretical profit of ABS is expected to shrink further due to slower growth in demand than in supply. However, the rigid demand and speculation demand still exist, which will support the ABS profit.