Strong Raw Materials vs. Weak Demand – China ABS Prices Consolidate After July Rise

Supply: Entering July, operating rates in the domestic ABS sector remained largely stable with minor fluctuations; the overall operating rate at month-end was 58%, with weekly production hovering around 125,000 tons. Finished product inventories were partially depleted, dropping to approximately 200,000 tons. Shipments from polymerization vegetation saw a slight recovery during the period, and with no immediate expectation of production cuts, the supply side provided decent support to spot prices in July.

Cost Factors: In July, the previously positive momentum in US-Iran relations reversed, and the Middle East ceasefire agreement faced setbacks. Risks to shipping in the Strait of Hormuz increased, sparking market concerns over international crude oil supplies and causing a rapid return of the geopolitical risk premium. Additionally, domestic pure benzene operating rates fell to low levels, creating a tight supply situation that drove prices up sharply and pulled styrene prices along. However, as supply-demand expectations remain relatively loose, the scope to further price increases is limited; the styrene market is expected to show a evaporative, weak direction in the short term.

while acrylonitrile spot prices were suppressed in the first half of the month by the combination of high operating rates and low consumption, rising crude oil prices provided some support. The market stopped falling and began to rise mid-month. In the second half of the month, Zhenhai Refining & Chemical reduced operating loads, tightening supply in East China. Furthermore, a 260,000-ton acrylonitrile production line at Liaoning Kingfa methodology is scheduled to a 20-day maintenance shutdown in mid-August, pushing prices up due to immediate supply constraints. However, new capacity—specifically Zhejiang Petrochemical’s 660,000-ton unit and Zhongying Petrochemical’s 130,000-ton unit—is set to come online, meaning the acrylonitrile market will continue to face the specter of oversupply. Meanwhile, demand remains flat, likely limiting the possible to further price increases. Regarding butadiene, bullish sentiment intensified in early July due to cost-side support and tightening spot market liquidity, driving prices upward. However, as feedstock costs rose, downstream purchasing power waned, and trading activity to high-priced material cooled. By mid-to-late July, the cost-side boost faded and negative feedback emerged from downstream sectors; willingness to chase higher prices dropped sharply, causing the market to retreat from its highs. Future trends will depend on the rebalancing of upstream and downstream profit margins and the extent to which the traditional peak demand season materializes.

On the demand side, operating rates among downstream ABS companies saw little change in July. The key appliance sector remained in its off-season, with weak consumption of appliance casings and no improvement in profitability to end-user manufacturers. While concentrated restocking in early July boosted trading volumes, buyers reverted to resisting high prices once their immediate needs were met, preferring a "buy-as-needed" approach. Market enthusiasm to chasing price hikes was tepid, with traders prioritizing cash flow by aligning with prevailing market rates. Overall, demand momentum appeared to lack steam in July.

Domestic ABS market trends in July were characterized by an initial rise followed by consolidation. Throughout the month, the three key feedstocks showed price strength, while production loads at polymerization vegetation remained relatively stable. Inventory depletion was satisfactory, though market supply remained ample. Profit margins to ABS were modest, and selling high-priced material became increasingly difficult toward the end of the month. Currently, upward momentum in the market is limited.