ABS Buyers Prepare for Price Increases after Demand Bottoms
13 Aug 2009 • by Natalie Aster
The good news for buyers of acrylonitrile-butadiene-styrene (ABS) resins is that these materials have dropped steeply in price since late last year. The down-side is that sales of most ABS goods have withered in the same time frame, lessening demand for ABS. And more bad news is building, as mounting economic pressures are forcing ABS producers to boost their prices.
Buyers report ABS purchase prices for the resin retreated by an average of 23% between October 2008 and May 2009, according to Purchasingdata.com. But surveys by Chemical Market Associates, Inc. (CMAI) show that North American demand for ABS in the first six months of 2009 slid by at least 35% over the same period a year earlier.
The building/construction and automotive industries have been most responsible for the drying up of ABS demand, notes Paul Blanchard, senior consultant for engineering plastics at CMAI. The cooling of ABS demand has hit other regions, says Blanchard, including Europe and Asia. Demand growth for ABS in China may be positive this year, says Greg Smith, an engineering plastics market analyst at Resin Technology Inc. in Fort Worth, Texas. But that growth, he adds, is likely to be "well below" recent averages, perhaps in the "single-digit" range instead of the more typical double-digit range.
ABS demand growth in China has been kept alive by the policy of the government there to use tax incentives to encourage production of consumer goods for the domestic market. But Asia in general is well supplied with ABS capacity, Blanchard notes, so there are few export opportunities in the region for U.S.-based ABS suppliers. In fact, he says that North American ABS exports to Asia are already a "very small number," and were down 49% during the first four months of 2009 compared to the same 2008 period.
Much production of finished ABS goods for the export market still goes on in Asia. At Pass & Seymour Legrand, a Syracuse, N.Y.-based manufacturer of electrical wiring devices, Douglas Cox, who handles the company's purchasing, says he now outsources to Asia the production of "more commoditized" ABS-containing datacom items in his product mix. Even with the recent domestic price declines in ABS, Cox says, "we found we could buy finished goods from Asia for a slightly higher price than North American [ABS] raw materials costs."
Those declines in domestic ABS prices—the result of downturns in styrene and butadiene monomer costs earlier this year—were not fully implemented for all buyers. Chris Robson, president of The Robson Co., a custom injection molder in Girard, Pa., says didn't his ABS prices come down early this year. He adds that his firm's relatively small ABS orders—under 1,000 lbs.—prevented him from getting volume discounts.
But ABS buyers will likely soon have to contend with higher rates. Among the major players in North America, BASF and Sabic announced a 7?/lb increase for ABS for July, and Ineos has been discussing similar adjustments with its customers. Analysts say there are several reasons for this upward trend but higher feedstock prices is one of them. According to Blanchard, acrylonitrile monomer prices have been rising due to more expensive propylene, which rose 8-9?/lb last month. Another ABS feedstock, butadiene, is in "tight supply" now, he adds, which has pushed up its selling price a whopping 14?/lb in July. The third ABS monomer, styrene, has gone up this year due to more expensive benzene.
Another source of inflationary pressure is a reduction in operating rates due to poor demand. Right now, says Smith, operating rates for ABS in North America are in the 50–60% range, extremely low by historical standards. This means that ABS producers are slashing their output but keeping their plants running.
Source: ABS Market at a Glance
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