In early March, the domestic ABS market experienced an epic rise, with significant increases in spot prices for all grades. The market atmosphere shifted from a post holiday calm to a hot one. According to the Commodity Market Analysis System of SunSirs, as of March 9th, the average price of ABS sample products was 14,233.33 RMB/ton, with a price level increase of 59.45% compared to the beginning of the month. Some grades even saw a weekly increase of over 3,000 RMB/ton, setting a record for the highest increase in recent years.

Supply level: coexistence of start-up recovery and maintenance expectations

Since returning after the holiday, the load of the domestic ABS industry has fluctuated and increased. In early March, the production capacity of enterprises such as Zhenjiang Qimei rose at a low level, and the overall operating level of the industry increased by about 6% to 70%. The weekly average output rebounded to 150,000 tons, and the inventory position of aggregation enterprises was digested to 187,000 tons. However, there is a 45 day maintenance plan for the mid month of Yingshili benzene collar, and Zhangzhou Qimei is expected to experience a decrease in load in March and April due to insufficient upstream raw material supply. Coupled with the impact of the atmosphere of reluctance to sell and speculation, the supply on site is more inclined towards tight balance. Overall, despite the ongoing supply-demand imbalance in the industry, the short-term supply side provides strong support for ABS spot prices.

Cost factor: Geopolitics triggers upstream three materials, with unprecedentedly strong cost support

In early March, due to the Middle East conflict affecting oil and gas production and supply, the escalation of the US Iran standoff, and the risk of the closure of the Strait of Hormuz, directly triggered market panic over energy and raw material supply. The upstream three materials of ABS, which belong to the same petrochemical product, were simultaneously subjected to severe impact.

Acrylonitrile: The price increase of acrylonitrile in the market is expanding, and the cost push is gradually increasing, and industry players are concerned about the continued supply of raw materials. Under the pressure of losses and expectations of supply variables, the market has a strong bullish atmosphere, and major suppliers have significantly increased their quotes. However, in the short term, the overall market supply is still relatively abundant, and attention should be paid to the degree of raw material acceptance under the squeeze of downstream product profits.

Butadiene: This week, the domestic butadiene market has experienced a strong surge, driven by international crude oil. The escalating conflict between the United States, Israel, and Iran has further fueled market panic, leading to an unprecedented surge in bullish sentiment in the market. From the perspective of the downstream butadiene rubber market, most butadiene rubber plants have maintained high load operation within ten days, and the demand for butadiene procurement remains stable. At the same time, the resumption of work and production by tire enterprises after the holiday is progressing smoothly, and production scheduling is gradually returning to normal levels. The capacity utilization rate of tire sample enterprises is expected to have a slight room for improvement, indirectly driving the growth of demand for butadiene rubber and thereby increasing the demand for butadiene procurement.

Styrene: The styrene market has also seen a significant increase. The listing price of the main refinery for pure benzene raw materials has been raised multiple times, and holders of goods are reluctant to sell at low prices. In the short term, pure benzene may continue to follow the rise in crude oil prices. In March, domestic styrene plants underwent frequent maintenance. Hengli Petrochemical's 720,000 ton plant was scheduled to shut down for 10 days on March 15th, Gulei Petrochemical's 600,000 ton plant was shut down on March 7th, and Zibo Junchen planned to replace the agent for maintenance at the end of March or early April, which will take about 40 days. It is expected that the supply will shrink. Although the resumption of work in the downstream is good, the demand increment is limited due to high costs. However, in the short term, it is expected that the styrene market will further rise due to high raw material prices and supply contraction.

In terms of demand: cost transmission and fear of rising sentiment dominate, real demand follow-up to be tested

The resumption of work by downstream ABS enterprises in early March was average, and there was no significant increase in consumption in the main terminal electrical housing industry. However, the market logic has temporarily shifted from "demand driven" to "cost driven+fear of price increases". Although the improvement in profitability of terminal enterprises is limited, under the bullish market sentiment, the urgent need for replenishment of inventory has been strongly driven, and buyers' purchasing willingness has increased. There has been a phenomenon of "grabbing goods" in the market, and even long queues for warehouse pickup have appeared in Dongguan and other places. The current inventory position of the merchant is not high, and there is reluctance to sell, resulting in a steady increase in actual transaction prices. However, it should be noted that some downstream enterprises are developing resistance towards high priced raw materials, and the follow-up efforts are questionable.

Recently, the domestic ABS market has seen strong growth, and its driving force has shifted from a simple supply-demand relationship to a triple combination of "geopolitical premium+cost transmission+supply tightening expectations". Business analysts believe that on a macro level, international crude oil directly drives up refining raw materials and transportation costs, indirectly resonating with the rise of bulk commodities. ABS has emerged from a significant upward trend independent of weak fundamentals, driven by strong cost support and supply side maintenance expectations.

However, after a sharp rise in early March, market risks are accumulating:

1. Beneficial digestion: After the sharp rise in upstream raw material prices, there is a high demand for consolidation, and the cost driving force may weaken.

2. Negative demand feedback: Terminal acceptance of high priced goods is decreasing, and if transactions turn weak, it will suppress the upward space of spot prices.

In the short term, under the seller's market pattern, the center of gravity of ABS prices has shifted significantly, but the risk of continuing to chase higher prices has increased. Industry players need to be cautious of the high-level digestion stage, where the market may shift from a straight line rise to a high-level oscillation, and it is not ruled out that some profit taking may cause a narrow correction. In the future, it is necessary to closely monitor international crude oil, Middle East shipping trends, and downstream factories' actual acceptance of high priced raw materials.

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