ABS Import Market Seems Hard to Follow the Recovery in China’s Domestic Market
Introduction: Since October, the supply and demand of ABS in China have increased, but the import market has not improved synchronously. The expansion in rivals, along with a fall in costs, has resulted in a steady decline in imported material prices. As the end of the year approaches, many Asian producers have no plan to reduce production. With abundant supply, prices may be relatively weak.
The prices of imported materials continue to decline, and the sales pressure is increasing.
Affected by the decline in costs and the increase in domestic supply, the ABS USD market has remained weak since mid-October, and prices have entered a downward trend. As of November 29, the mainstream price in the Hong Kong market has reached $1,405-1,545 US/mt, with low-end prices falling by $90/mt from October 10 and high-end prices falling by $75/mt from October 10. Most Asian producers had ample resources, but sales progress was not smooth. First-hand traders were cautious in controlling inventory levels, and downstream demand was sluggish, resulting in a weak trading atmosphere.
Rising supply drives market circulation.
The supply and demand structure of the USD market has significantly weakened in the past two months. On the one hand, most producers in Asia maintained stable output, and it was reported that two ABS producers in South Korea have operating loads of around 80% and 50% respectively. On the other hand, with the resumption of production and profit recovery, Chinese producers uplifted the operating rate. The MOM increase in operating rate in October and November was 1.12 percentage points and 4.66 percentage points, respectively. Domestic materials seized a portion of the imported market share and enhanced their internal circulation momentum by virtue of price advantage and resource allocation. Due to the relatively high cost and long delivery cycle of imported goods, some buyers' interest in imported goods declined.
In October, China imported a total of 84kt of ABS. The import volume decreased by 1.45% MOM and 10.60% YOY. The total import volume of ABS has been declining for two consecutive months. From the actual market performance in November, the import volume may continue to decline.
Cost decline puts pressure on imported material prices.
From the perspective of the upstream market, as of November 29, Asian acrylonitrile price was $1,250-1,320/mt (CFR China); Asian butadiene price was $1,100-1,200/mt (CFR China); Asian styrene price was $1,020-1,030/mt (CFR China). The theoretical cost of ABS by the end of this month was around $1,389/mt, down $109/mt from October 10. Under the long-term constraint of high costs, it is difficult for Asian ABS producers to adjust prices in sync with costs. Recently, many producers’ offers have declined narrowly, and it was reported that some offers were concentrated in the range of $1,400-1,540/mt.
The import price may remain weak amid the competition pressure.
Boosted by the trade-in policy of home appliances and the concentration of export orders, actual demand showed an improvement trend, while the import market has not been boosted by demand dividends. There is no sign of easing the competitive pressure on imported materials. Currently, most producers in Asia are expected to maintain stable production, while China’s output in December is expected to reach a historic high of 609.7kt an increase of 3.13% compared to the previous month. Higher cost-effectiveness may stimulate downstream buyers to choose more China-origin goods. However, it can also be seen that imported goods are showing structural differentiation. Prices of partially transparent, flame-retardant, and board materials remain relatively high due to the technological and brand advantages. Overall, from the perspective of general-purpose materials, the imported material market may continue to be under pressure next month, and prices will remain weak.
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