SunSirs: Strong Supply and Weak Demand, China ABS Market Continues to Decline in August

In August, the overall trend of the domestic ABS market continued to be weak, and the spot prices of most grades continued to decline. According to the Commodity Market Analysis System of SunSirs, as of September 1st, the average price of ABS sample products was 10,125 RMB/ton, with a price level increase or decrease of -1.82% compared to early August.

Supply level: Since early August, the domestic ABS industry has seen an increase in load before leveling off. The Dalian Hengli plant restarted in the first half of the month, and the Tianjin Dagu equipment pipeline blowing task ended. The device dynamics are limited in the second half of the month, and the overall load level of the industry has risen from 67% at the end of July to 71% before roughly leveling off. At the end of August, the weekly average production was at the level of 140,000 tons, and the inventory position of aggregation enterprises increased at a high level of 230,000 tons. The on-site supply remained abundant. Overall, the long-term loose supply pattern in the ABS market remains unchanged, and the high inventory levels in the industry are relatively controllable. But Zhenjiang Qimei and Liaoning Jinfa have heard that there is a plan to increase the load, and the supply side is expected to continue to be loose. Therefore, the supply side has weak support for ABS spot prices.

Cost factor: The overall stalemate in the upstream three material market of ABS in August has limited impact on the cost side support of ABS. At the beginning of the month, the acrylonitrile production capacity of East China Zhejiang Petrochemical and Sinochem Quanzhou units decreased, leading to a decrease in industry capacity utilization rate and an upward trend in market offers. However, with the increase in on-site supply and insufficient follow-up in consumption, local inventory pressure has increased. After the decline in the raw material propylene market and the rebound of acrylonitrile gains, it has been operating in a stalemate.

The domestic butadiene market rebounded after a decline in August, operating in a narrow range of fluctuations. In the first half of the year, the overall demand was biased towards rigid demand, and the decline in spot prices attracted some replenishment to enter the market, but they were all temporary demand. Starting from mid month, boosted by the rise of downstream products, the atmosphere in the butadiene market began to improve, and domestic main refineries raised their ex factory prices one after another. Currently, under the influence of demand support, it is expected that the butadiene market will have a stable to strong trend in the short term.

The styrene sector mainly experienced fluctuations in August. At the beginning of the month, there were fluctuations in factory load, with frequent device restarts and maintenance. At the same time, there is an increase in production capacity. The operating rates of the downstream three S industries have fluctuated, and the overall demand is decreasing. Throughout the month, there has been a dilemma between long and short positions, and the fundamentals are difficult to describe as strong. However, multiple sets of equipment have been scheduled for maintenance in September, and the supply side is expected to strengthen. It is expected that the styrene market will warm up in the future.

On the demand side: In the medium to long term, the downstream factories of ABS have had average loads. The current market is in a period of transition between peak and off peak seasons, and terminal enterprises have not seen any improvement in procurement. The logic is still to maintain the demand for supplementary orders. In mid August, the production schedule of the electrical casing industry further decreased and consumption shrank. Without significant changes on a macro level, the cautious atmosphere in the external market remains unchanged, and the flow rate of goods is slow. Domestic inventory levels remain high and sideways, with continued loose supply and ample room for on-site turnover. Overall, there has been no improvement in the demand side's support for the ABS market.

The domestic ABS market in August was weak and consolidated. The overall changes in the upstream three materials are not significant, and the production load of the ABS polymerization plant has leveled off after an increase, while the demand side's off-season level remains unchanged. Analysts from SunSirs believe that the long-term drag on spot prices of ABS due to supply and demand contradictions makes it difficult for the market momentum to improve. However, as we are about to enter the traditional peak season, it is recommended to closely monitor the volume increase on the demand side.

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